The Federal Reserve Board's Open Market Committee voted in late June to raise short-term interest rates from 7.5 percent to 7.75 percent, according to minutes of the meeting released yesterday.
The minutes, customarily released a month after the meeting, confirm what analysts said the Fed's policy actions were in the late June and early July.
Federal Reserve Board chairman G. William Miller, who a week later was outvoted when the central bank raised the interest it charges its member banks to borrow from it, voted with the majority on the open market committee.
Some administration members said Miller's vote against a discount rate rise was a political one, which Miller denied them - and again denied in a telephone interview yesterday.
Miller said yesterday that when the open market committee met on June 20 "some tightening (of monetary policy) was clearly indicated." He said he saw no "inconsistency" with his vote against raising the discount rate from 7 percent to 7.25 percent.
He said that he thought the FED needed more information before it took another tightening step. In trying to fight inflation, "we have to be sure we don't overshoot," Miller said.
Critics of Miller said his discount rate vote was political, and probably meant to appease a Carter administration that is getting upset with the Fed's moves to raise interest rates. Critics claim that the discount rate rise was not a tightening in monetary policy, but merely an attempt by the central bank to bring its lending rate in line with the higher interest rates it put in effect by buying and selling government securities.
The Fed apparently moved this week to tighten up monetary policy a little more.
When the Fed moves to tighten monetary policy it does so by allowing the so-called federal funds rate to rise. The federal funds rate is the interest banks charge each other for overnight loans of excess reserves.
The federal funds rate, which had been trading in the neighborhood of 7.75 percent for most of July, traded around 7 15/16 percent yesterday.
When interest rates rise, money becomes more expensive and, under the Fed's theory, businesses and consumers borrow less. That in turn is supposed to reduce the size of the money supply - currency in circulation and checking accounts.
At the June meeting two members of the open market committee dissented from the committee's move to tighten slightly. Members Mark Willes and Willis Winn wanted the Fed to take stronger actions to hold down money growth.
The open market committee, which is composed of the seven governors of the Fed system and five of the 12 presidents of the Fed district banks, also raised the targets for monetary growth in June and July, to 5 percent to 10 percent.
Over the year, the fed still wants to keep the growth of the money supply in the range of 4 percent to 6.5 percent.