Two regional Federal Reserve banks, Kansas City and Dallas, pushed again for a modest increase in the rate charged to banks for emergency loans, according to minutes from an August policy meeting released Tuesday.

The Fed — the U.S. central bank — kept the discount rate unchanged at 0.75 percent at its Aug. 10 meeting. The Dallas and Kansas City Fed boards requested an increase to 1 percent, while the other 10 regional Fed banks sought no change.
The minutes of the Fed’s August discount rate meeting said the regional Fed directors noted a slower-than-expected pace of recovery in output and employment.

Some directors noted slightly higher growth in certain sectors, such as manufacturing, while others noted consumer spending had softened.

“The housing sector continued to be depressed, and labor markets remained weak. Overall, directors anticipated only modest near term expansion,” the Fed said. “With inflation subdued and inflation expectations stable, most directors recommended that the current accommodative stance of monetary policy be maintained.”

The Fed at the Aug. 10 policy meeting left the federal funds rate, its main policy tool, unchanged in the zero to 0.25 percent range, but moved to reinvest maturing mortgage-backed securities into Treasury debt to push down borrowing rates further.

Before the credit crisis in 2007, the spread between the federal funds rate and the discount rate was a full point. There is disagreement at the Fed as to whether that gap should be returned to that level, a debate that has likely taken on new importance given a recent weakening in the economic data.

“As another step toward restoring a pre-crisis discount rate structure, some directors supported increasing the primary credit rate by 25 basis points (to 1 percent) at this time,” the meeting minutes said.

However, the Fed said directors emphasized that an increase in the spread “would not represent a change in monetary policy, but rather a move toward normalization of the primary credit rate.”