Minutes on the discount rate released by the Federal Reserve on the 25th showed that four of the twelve regional Federal Reserve banks supported a quarter percentage point increase in the discount rate in July. The four banks that backed the hike were Cleveland, Dallas, Minneapolis, and Kansas City. The Federal Reserve decided at the July 28 to 29 Federal Open Market Committee meeting to keep the target range for the federal funds rate at 3.50 to 3.75 percent, but Cleveland Fed President Hammack, Dallas Fed President Logan, and Minneapolis Fed President Kashkari argued for a quarter point rate increase and voted against holding rates steady. Kansas City Fed President Schmid does not have a vote at this year's FOMC meetings. The discount rate is the rate applied when financial institutions borrow funds directly from the Fed, and the minutes again showed that views within the Federal Reserve were divided over the appropriate level of interest rates.
Four regional Fed banks backed a discount rate hike, signaling internal support for tighter policy, which could push the effective federal funds rate higher.
Hawkish signals from Fed officials suggest potential rate hikes, likely raising long-term yields.
