UPDATE 1-Two US Fed banks wanted August discount rate hike

(Updates with quotes, background, paragraphs 4 to end)

WASHINGTON, Sept 7 (BestGrowthStock) – Two regional Federal Reserve
banks, Kansas City and Dallas, pushed again for a modest
increase in the rate charged to banks for emergency loans,
according to minutes from an August policy meeting released on
Tuesday.

The Fed — the U.S. central bank — kept the discount rate
unchanged at 0.75 percent at its Aug. 10 meeting. The Dallas
and Kansas City Fed boards requested an increase to 1 percent,
while the other 10 regional Fed banks sought no change.

The minutes of the Fed’s August discount rate meeting said
the regional Fed directors noted a slower-than-expected pace of
recovery in output and employment.

Some directors noted slightly higher growth in certain
sectors, such as manufacturing, while others noted consumer
spending had softened.

“The housing sector continued to be depressed, and labor
markets remained weak. Overall directors anticipated only
modest near term expansion,” the Fed said. “With inflation
subdued and inflation expectations stable, most directors
recommended that the current accommodative stance of monetary
policy be maintained.”

The Fed at the Aug. 10 policy meeting left the federal
funds rate, its main policy tool, unchanged in the zero to 0.25
percent range, but moved to reinvest maturing mortgage-backed
securities into Treasury debt to push down borrowing rates
further.

Before the credit crisis struck in 2007, the spread between
the federal funds rate and the discount rate was a full
percentage point. There is internal disagreement at the Fed as
to whether that gap should be returned to that level, a debate
that has likely taken on new importance given a recent
weakening in the economic data.

“As another step toward restoring a pre-crisis discount
rate structure, some directors supported increasing the primary
credit rate by 25 basis points (to 1 percent) at this time,”
the meeting minutes said.

However, the Fed said directors emphasized that an increase
in the spread “would not represent a change in monetary policy,
but rather a move toward normalization of the primary credit
rate.”
(Reporting by David Lawder; Editing by Neil Stempleman)

UPDATE 1-Two US Fed banks wanted August discount rate hike