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Minutes of the Federal Reserve's discount rate meeting released on Tuesday showed that directors of the Federal Reserve Bank of New York and the Federal Reserve Bank of Chicago voted in favor of lowering the discount rate in July.

This could be a signal that New York Fed President John Williams and Chicago Fed President Austan Goolsbee are ready to support a rate cut at the Fed's July rate-setting meeting.

The discount rate is the interest rate that commercial banks and other depository institutions pay to obtain loans from their regional Federal Reserve bank's lending facilities, known as the discount window. Regional Federal Reserve bank boards cannot change the discount rate without the approval of the Federal Reserve Board of Governors in Washington. Generally, their votes to change the discount rate are consistent with the policy preferences of the regional Federal Reserve president.

Williams and Goolsbee agreed with other policymakers to keep the federal funds rate unchanged at the July 30-31 Federal Open Market Committee meeting. Minutes from that meeting later showed that “several” officials saw a legitimate case for a rate cut at that meeting.

The market generally expects the Fed to cut interest rates at its policy meeting on September 17-18. With inflationary pressures easing and job market risks rising, the Fed is likely to cut interest rates at its September policy meeting. Fed Chairman Powell emphasized in his speech at the Kansas City Fed's annual research conference held in Jackson Hole last Friday that the time has come to cut interest rates.