New York – The Federal Reserve said on Thursday it was raising the interest rate it charges banks for emergency loans, citing improvement in financial market conditions.
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The Fed said the discount rate, the interest rate it charges banks, would be increased to 0.75 percent from 0.50 percent, effective Friday.
“Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve’s lending facilities,” the Fed said in a statement.
“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,” it said.
Market watchers were shocked by the unexpected announcement, which came after markets closed Thursday.
“I’m shocked. Completely shocked,” Todd Schoenberger, managing director of LandColt Trading said of the Fed’s move to raise the discount rate. “It makes me wonder if the CPI number coming out tomorrow is going to be just absolutely horrible—maybe they got wind of something,” he said.
Schoenberger expects the Fed to raise the federal-funds rate, the rate banks charge each other, at its next meeting March 17-18. He, like many traders, didn’t expect the Fed to make a move until the second half of this year.
The analyst expects stocks to pull back from the Dow Jones Industrial Average’s recent three-day winning streak as a result of the Fed move.
“Expect a dramatic selloff at the open tomorrow morning,” Schoenberger told CNBC.
Pimco Founder and Co-Chief Investment Officer Bill Gross said he sees the Fed’s action as part of a much larger pullback from the government’s economic stimulus strategy.
“This move is more of a classical monetary policy maneuver … as opposed to the beginning of an interest rate increase or any tightening from the standpoint of interest rates, and I think that’s what’s critical for bond investor,” Gross said.
The U.S. dollar reached its highest point against the euro since May of 2009 after the Fed’s announcement Thursday. Gold prices fell as a result of the news.
Less profit for Goldman Sachs.
The religious folks on this site probably don’t even understand what the fed discount window even is b\c they didn’t go to college or grad school.
its great news for me since I short stock
hopefully they reach at least a low 5 % very soon
we need normal rates to adjust economy to a reality and not to continue ina bubble dream
It may have been a ‘shock’ to the ObamaMania Tingly Feeling Running Up Their Legs Media but to us normal people we saw this coming. There is NO WAY they could keep giving out money without charging more interest on it. Get used to it because as long as Obama keeps spending our money like a drunken socialist, the interest is going to go higher & higher & higher & higher .
What “shock”??? they have been saying for the past year they will soon begin to return rates to more normal levels. Whoever wrote this headline must be living in a cave or is a real frumme yid and no doesn’t watch the news on TV, trashed his computer in accordance with the recent kol koreh by the rabbonim and no longer reads a newspaper (although he writes headlines)
Isn’t the discount window ; where they sell merchandise at a discount. ? see, i know
Wouldn;t be surprised , the market closes higher tomorrow .
Comment 2
You must be making 27k a year before taxes the People woe don’t know what they are doing just what hasem gives them they will survive you are nothing but a 9 to 5 idiot
how does this effect home equity rates?
Let’s be realistic, you can’t have zero rates indefinitely.
Will this have an effect on residential property values? Negative or positive? Someone please elaborate.
Reply to Ha ha. How naive . You need to go College or Graduate school to know what the fed discount window is. Any dummy can find the information
any website