The Fed and the Discount Rate

A friend noted an interesting indicator yesterday of a growing split among FOMC participants. The clue is found in the little-read minutes of the Board of Governors’ meetings on the discount rate. For those who don’t know, each Federal Reserve Bank board of directors is required to make recommendations every two weeks on where they would like to set the discount rate. The recommendations are staggered so that the Board of Governors has a “live” recommendation should it desire to change the discount rate. Legally it may not change the rate without a recommendation from at least one reserve bank.