Asian stocks and U.S. equity futures fell, while the dollar rose as an increase in the Federal Reserve’s discount rate spurred concern the economic rebound will slow as stimulus programs are unwound. The Fed raised the discount rate from 0.5 percent to 0.75 percent effective Feb. 19 and said the move will encourage financial institutions to rely more on money markets, rather than the central bank, for short-term loans. It was the first increase in the discount rate in more than three years, and the move widens the discount rate spread over the top range for the federal funds rate to 0.5 percentage point.
The central bank also cited last month’s statement, which said economic conditions are likely to warrant “exceptionally low” levels of the federal funds rate, or the target rate for overnight loans between banks, for “an extended period.”
The move marks another step by the Fed in a gradual retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The Fed has provided hundreds of billions of dollars in credit to banks, bond dealers, commercial paper borrowers and troubled financial institutions.
The central bank also cited last month’s statement, which said economic conditions are likely to warrant “exceptionally low” levels of the federal funds rate, or the target rate for overnight loans between banks, for “an extended period.”
The move marks another step by the Fed in a gradual retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The Fed has provided hundreds of billions of dollars in credit to banks, bond dealers, commercial paper borrowers and troubled financial institutions.
