The pseudo federal government entity, the Federal Reserve (they are a private institution Not a federal government entity) raised its discount rate last night to .75% from .50%. It had been widely telegraphed they would do this, however, the timing of the move wasn’t anticipated so quickly.
The move signals the end from the Fed’s supplying of liquidity that drove its balance sheet to record levels and also the most aggressive monetary policy in its existence.
In the statement accompanying the hike, the Federal Reserve created it clear it had been not just a tightening move and low Fed Fund rates would continue for “an extended period”.
Federal Reserve officials, including Ben Bernanke, had made it clear within the past couple of weeks the first increase would likely be a hike within the discount rate which is the interest rate charged to banks for borrowing in the ‘window’.
Bernanke readied investors for the move in a February 10, 2010 testimony to Congress, saying the discount rate would have to be raised “before long.”
Within the minutes of the January 26-27 Federal Open Market Committee meeting released Feb. 17, policy makers said an increase “would quickly be appropriate.”
Tags: Mortgage News
