By Ann Saphir
Jan 6 (Reuters) – Directors at two-thirds of the Federal Reserve’s regional banks voted to leave the interest rate charged to commercial banks for emergency loans unchanged ahead of last month’s Fed meeting, minutes of the central bank’s discount rate meetings showed on Tuesday.
The rate recommendations – overruled when Fed policymakers decided in a 9-3 vote to lower the policy rate by a quarter of a percentage point at their December 9-10 meeting – reveal another dimension to how contested that rate-cut decision was.
Voting for a primary credit rate cut matching the Fed’s policy rate move were the directors of just four banks – New York, Philadelphia, St. Louis and San Francisco. The directors of all the other banks wanted to leave the rate, also known as the discount rate, at its existing level.
Voting against were directors of eight banks, including the Chicago and Kansas City Fed banks, whose presidents cast the two hawkish dissents on December’s policy vote.
Directors’ discount rate votes are often, but not always, done at the recommendation of the Fed bank president, and thus can be a guide to that policymaker’s view.
But directors at the Boston Fed also voted to leave the discount rate unchanged. Boston Fed President Susan Collins ended up voting for the policy rate cut on December 10, a decision she later said was a “close call.”
Directors of the Richmond, Cleveland, Atlanta, Minneapolis and Dallas Fed banks also voted to leave the discount rate unchanged, a signal that their presidents may also have preferred no rate cut. The presidents of most of those banks had publicly expressed reservations about further rate cuts.
“Most (directors) noted strong demand for investments related to AI and data center financing and construction,” the minutes said. “Most directors anticipated tariff-related and other cost increases in 2026.”
The expectation for strong business spending and higher prices offers a possible explanation for the broad support among Fed bank directors for leaving borrowing costs where they were.
Fed bank directors are not policymakers and do not determine the Fed’s interest rate, but they do meet regularly with their respective Fed presidents who say their directors’ views help shape their own outlooks.
The discount rate is voted on at regular meetings by regional Fed bank boards but is ultimately set by the Fed Board to match the top of the range of the policy target rate, which was lowered on December 10 to 3.5%-3.75%.
(Reporting by Ann Saphir; Editing by Andrea Ricci)
