FED Raise Discount Rate, Dollar Surge

The U.S Federal Reserve raises the discount rate from 0,5% to 0,75% as tightening of the monetary policy begins. The dollar strengthens against all major currencies.

“These changes are intended as a further normalization of the Federal Reserve’s lending facilities.”

U.S. Federal Reserve

The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs.

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 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). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate from 0,5 percent to 0,75 percent.

This action is effective on February 19.

Full Press Release.

How High?

Chief Economist David Rosenberg at Gluskin Sheff says the tightening policy will likely not be very beneficial to a dated-Treasury long position.

The question that everyone is asking is:  if this is a first step to “normalization”, with every aspect of the market being abnormal, just how far will the Fed really go?

Watch CNBC video.

Dollar through the roof

The dollar is surging against all major currencies.

EUR/USD:

GBP/USD:

USD/JPY:

USD/NOK:


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0 thoughts on “FED Raise Discount Rate, Dollar Surge

  1. Rather interesting blog you’ve got here. Thanx for it. I like such themes and everything that is connected to this matter. I would like to read more on that blog soon.

    Best wishes

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