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This article got first published by Marc Chandler on marctomarket.com

Those regional Federal Reserve banks that want to hike the discount rate are gradually increasing.  Last month, the Richmond Fed joined four other regional Fed banks (Dallas, Kansas City, Philadelphia, and Cleveland).
On one hand this shows that nearly half of the regional Fed banks are getting more comfortable with higher rates.  On the other hand, this may say less about monetary policy per se, and reflects the desire to return to improve margins.  A higher discount rate widens the spread between the primary credit rate and the upper end of the target range for Fed funds to where it was pre-crisis (75 bp).
The Minneapolis Fed has been requesting a cut in the discount rate since March.   This is the outlier.   It does not reflect the direction the Fed is moving.   While the majority of the FOMC expects that a rate hike will be appropriate late this year, the Minneapolis Fed President Kocherlakota does not think a hike is needed this year.  He has already indicated the intention of not seeking another term when his term end next February.
Yellen’s has confirmed the intention to raise rates before the end of the year.  In her prepared remarks before Congress, she noted that 15 of 17 Fed officials expect to hike rates this year.  She argued that prospects of the US economy are improving despite the potential headwinds from abroad.   She recognized that a weakness in overseas markets is a force, in addition to the dollar, dampening net exports.
Lastly we note that the Altanta Fed’s GDPNow puts Q2 GDP at 2.4%.  After the retail sales report it did revised its projection of real personal consumption to a 2.7% annualized rate in Q2 down from 2.9%.  US rates and the dollar are firmer as a consequence of both Yellen’s remarks and the firmer than expected PPI and Empire State manufacturing survey for July.

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