Four regional Federal Reserve banks voted in April to raise the interest rate the Fed charges on short-term emergency loans to banks, the central bank announced Tuesday, a sign that officials across the Federal Reserve system see the economy improving enough to tighten monetary policy.
Only two of the Fed’s 12 regional banks had requested discount rate increases in the month before.
The discount rate is the rate the Fed charges banks facing short-term liquidity needs to borrow, and was set at 1 percent in December when the Fed raised rates from zero for the first time since 2008.
The discount rate is separate from the Fed’s main target rate for monetary policy, which remains at 0.25 percent to 0.5 percent. But it is meant to track the target rate, remaining slightly above it.
Tuesday’s announcement indicates that the officials at the four banks who sought a 0.25 increase see a need to tighten monetary policy. The banks were the Cleveland, Richmond, Kansas City and San Francisco regional banks.
Those banks cited job growth and the expectation that inflation will rise as the reasons to raise the discount rate, according to the minutes of their meetings published Tuesday.
As a group, all 12 banks were “generally positive” about economic growth picking up in the months ahead. Some of them reported that it was getting harder for businesses to hire workers and that wage pressures were rising, although the minutes did not detail which ones regions felt those dynamics.
The Fed’s monetary policy committee will consider the banks’ requests at their next meeting in mid-June. Fed officials have said that the meeting is a “live” one, meaning that they may act to raise rates.
Investors will get a preview of what the Fed might decide on June 6, when Chairwoman Janet Yellen is scheduled to give a speech in Philadelphia.
