Hawkish Sentiment Detected in Discount Rate Minutes

The Federal Reserve's discount rate minutes have revealed that four out of twelve regional bank directors voted to increase the discount rate prior to the July 28-29 FOMC confab. Historically, this has served as a soft leading gauge of internal pressure for policy firming.

In past tightening cycles, a rising count of boards seeking a higher discount rate tended to appear before the committee itself moved. Conversely, a stagnant or shrinking count accompanied extended holds.

This minority vote is seen as an indication that hawkish sentiment exists on the boards but has not reached the breadth that has preceded actual rate action. A majority or near-majority of directors voting for an increase would signal more significant internal pressure for policy firming.