MercoPress. South Atlantic News Agency

Fed minutes reveal differences on interest rates cuts

Nine of Federal Reserve directors thought continued deterioration in financial markets and weakened economic conditions in the housing and labor markets needed the half percentage point cut to the discount rate last month.

However two directors preferred no change to the existing rate in view of the Fed's previous three-quarter percentage point cut, according to the minutes from the meeting. Directors from Fed Reserve banks of New York, Boston, Philadelphia, Cleveland, Atlanta, St. Louis, Kansas City, San Francisco and Chicago voted in favor of the half percentage point cut to 3.5%. But the directors of the Federal Reserve banks of Richmond and Dallas voted to maintain the existing rate of 4% preferring to take no further action without new information, the minutes said. The directors of the two Fed banks noted the previous cut to the discount rate of three-quarters of a percentage point, approved on January 21. Prior to that approval, the positions were very much dispersed. Chicago and Minneapolis voted in favor of a three-quarter percentage point cut, noting that recent economic reports on employment, manufacturing, housing, and consumer spending had been negative. The directors of the Federal Reserve Banks of Boston, Cleveland, New York and Philadelphia voted in favor of cutting rates by half a percentage point, viewing the move "an approximately accommodative stance for monetary policy at this time". The directors of Richmond and Dallas voted in favor of a quarter percentage point cut, "in large measure because of their substantial uncertainty about the outlook for inflation as well as real economic activity", the minutes said. The directors of Atlanta, St. Louis, Kansas City, and San Francisco, who voted to maintain the existing rate of 4.75% agreed with concerns about economic growth and inflation but preferred to review additional data before considering a rate reduction. The Fed Open Market Committee is scheduled to meet March 18.