US Fed tightens lending for first time since recession
19 Feb 2010, 0754 hrs
WASHINGTON: The Federal Reserve tightened monetary policy Thursday for the first time in more than a year, raising by 0.25 percentage points the
Discount interest rate at which the US central bank lends directly to commercial banks. The Fed's discount rate was hiked from 0.5 percent to 0.75 percent. The action was taken "in light of continued improvement in financial market conditions," a statement said. The more closely watched federal funds rate remains unchanged at a record low of near 0 percent. Neither the federal funds rate nor the discount rate had been altered since December 2008.
Fed Chairman Ben Bernanke had indicated earlier this month that the central bank was considering a monetary policy move, as Wall Street recovered from a near collapse that began in September 2008. The Fed said it hoped the new rate hike would encourage banks to seek short-term borrowing from private sources rather than the central bank as the financial sector stabilizes.
What does this mean Harry? We need to see some annotations?
ReplyDeleteSome parts that could be taken from this article: US monetary policy continues to keep interest rates very low (why might they do that in a recession?). However, the discount rate has been raised. Perhpas the US federal reserve (the US Central Bank, similar to the Bank of England) hopes that more money will be leant from the private sector.