Tags: Federal Reserve | discount | meeting | rates

Economists See No Significance in Routine Fed Discount Meeting

Monday, 23 Nov 2015 12:33 PM

The Federal Reserve Board meets on Monday to review discount rate requests from the boards of directors of its 12 regional reserve banks.

The Board routinely reviews such requests and subsequently releases minutes of their discussions after Federal Open Market Committee meetings. Reserve bank boards meet every two weeks and make recommendations on the discount rate, which is the interest rate banks pay for borrowing directly from the Fed. The discount rate is currently set at 0.75 percent.

Discount rate moves are typically coordinated with the FOMC’s directive on the federal funds rate, rising or falling in tandem with policy makers’ decisions.

Requests to change the rate can be used by regional Fed banks to signal a policy preference. In September, the boards of eight of 12 regional banks voted to raise the discount rate to 1 percent, a request the Fed board in Washington didn’t grant.

Monday’s meeting in Washington, scheduled to start at 11:30 a.m., doesn’t signal an imminent interest-rate hike, economists said.

“The Fed is not going to make those kinds of decisions as a Board outside of FOMC meetings,” said Michael Hanson, senior economist at Bank of America Corp. in New York. “It would send completely the wrong message to the markets.”

Discount rate meetings are regularly scheduled but can be held under “expedited notice” under government regulations if the Fed posts the meeting notice less than a week in advance.

“It doesn’t have any monetary policy implications,” said Michael Gapen, chief U.S. economist at Barclays Capital Inc. in New York. “Historically, the discount rate would change after a move in the federal funds rate.”

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Economy
The Federal Reserve Board meets on Monday to review discount rate requests from the boards of directors of its 12 regional reserve banks.
Federal Reserve, discount, meeting, rates
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2015-33-23
Monday, 23 Nov 2015 12:33 PM
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