US: Regional Federal Reserve banks called for a discount rate hike last month - BBH

Research Team at BBH, suggests that there was a news yesterday that nine of the 12 regional Federal Reserve banks called for a discount rate hike last month. 

Key Quotes

“The regional Federal Reserve branches make a non-binding recommendation to the Board of Governors. The Atlanta Fed became the news convert to the cause.  This is the highest number requesting that the discount rate is lifted from 1.0% to 1.25% since last December.  The Board obviously did not acquiesce. However, it is indicative of the mood.  

The three regional Fed branches that did go with the majority are interesting in their own right.  NY, which is understandable in our framework that sees Dudley as part of the core Fed leadership that drives policy.  Chicago is not much of a surprise.  Evans is among the leading doves.  The Minneapolis Fed may be the most surprising, but Kashkari has taken a dovish line.  

Recall that the September dot plots showed three officials thinking that a rate hike this year would not be appropriate.  At the time, many, including ourselves, suspected Governors Brainard and/or Tarullo were among those outliers.  It appeared that Yellen had to choose between dissents from the Governors if the Fed hiked or dissents from regional Fed presidents if it stood pat.  However, with the discount rate minutes, there are other scenarios that ought to be considered, and in any event, will likely prevent the odds of a December hike unwind too far ahead of the jobs data early next month.”