WASHINGTON (MNI) – Encouraged by somewhat of an improvement in the
economic data, the Boston Federal Reserve Bank directors voted for a
second time to cut the discount rate a quarter point while the Kansas
City Bank stuck to its usual stance, asking for an increase of the same
amount, the discount rate minutes showed Tuesday.

The five members of the Federal Reserve Board took note of the
requests “and discussed, on a preliminary basis, their individual
assessment of the appropriate rate and its communication,” hinting that
a change may be sooner rather than later. Yet the Board also noted most
regional Bank directors wanted no change.

For the time being, at least on January 23, there was “no
sentiment” on the Board for changing the primary credit rate and
although it was discussed at the Federal Open Market Committee two-day
meeting that began the next day, the FOMC decided to stick to the 0.75%
rate a while longer.

Boston bank directors had voted Dec. 8 to increase the rate.

At the regional banks, the discount rate minutes said, “Federal
Reserve Bank directors noted that recent economic data had improved
somewhat, but they were cautious about the outlook and expected only
moderate growth over the coming quarters.”

“Some” of the directors “reported encouraging though uneven
increases in consumer spending and retail sales, as well as further
gains in manufacturing activity in certain sectors.”

At the same time, “The housing sector remained weak, despite
pockets of increased activity in some parts of the country. Although
conditions in labor markets had shown some signs of improvement,
directors remained concerned about the elevated rate of unemployment.”

“Many directors also cited the downside risks posed by ongoing
uncertainty about global financial markets and U.S. regulatory and
fiscal policies,” the discount rate minutes went on.

“Inflationary pressures had continued to moderate, and longer-term
inflation expectations had remained stable. Against this backdrop, most
directors recommended that the current primary credit rate be
maintained.”

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MK$$$$]