Fed hikes rate on discount window amid easing financial crisis

WASHINGTON, February 18, 2010 (AFP) – The US Federal Reserve said Thursday it was increasing the interest rate it charged on emergency loans to banks in a move to normalize lending after radical measures to jolt the economy from recession. “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, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC),” it said.

At the January 26-27 meeting, the FOMC, the policy-making body of of the central bank, left its target range for the federal funds rate — the rate at which the banks charge each other for overnight loans — at zero to 0.25 percent.

It had said that it anticipated economic conditions were likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Fed chief Ben Bernanke had hinted last week about the rise in the discount rate but some analysts expressed surprise it would be made that soon.

“The exact timing is a surprise but the key point is that this has no implications for the stance of monetary policy in the broader economy,” said Ian Shepherdson, chief US e