Fed discount cut drew opposition

Five of 12 regional Federal Reserve Bank boards opposed the central bank’s decision to lower the interest rate for direct loans to banks by half a percentage point last month.

Four district banks voted to lower the discount lending rate by only a quarter-point in early September, while one district bank wanted no change, according to minutes released Tuesday.

Votes by regional Fed banks on changes in the discount rate, which must be approved by the Federal Reserve Board, are often signals of their preferences for where the federal funds rate -- which banks pay other banks for overnight loans -- should be. The central bank’s benchmark rate, the funds rate is considered to have more influence than the discount rate over the interest costs paid by corporate and individual borrowers.

The central bank’s Federal Open Market Committee voted unanimously Sept. 18 to lower the fed funds rate to 4.75% from 5.25%, citing concerns that the housing recession would drag down the overall economy.