US Federal Reserve raises discount rates

Date: Friday 19 Feb 2010

The Federal Reserve raised the discount rate at which it lends money to banks by 25 basis points to 0.75% last night

The increase comes in response to improving financial market conditions, the Fed said. The dollar soared on the news.

While the possibility of lifting the discount rate had been raised by Fed chairman Ben Bernanke last week, the timing came as a surprise given that the policy meeting is not until March 16.

The Fed moved to dampen expectations that the adjustment will lead to a rise in the benchmark lending rate any time soon.

‘The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy,’ the Fed said in a statement.

The benchmark lending rate in the US was slashed from 1% to a range between zero and 0.25% in December 2008 following the global collapse in financial markets.

The discount rate has historically sat at about 1% above the benchmark rate.

« Go back to news channel

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE