Fed ramps up discount rate to 0.75%

Bear in mind this hike applies to the "discount rate" , not the Fed target rate. Bucky is getting some milage out of this news , while Gold and commodities react in knee-jerk fashion.


www.marketwatch.com...

WASHINGTON (MarketWatch) -- The Federal Reserve surprised financial markets Thursday by lifting the lending rate it charges banks, one of the most potent signs to date that the central bank is ready to dismantle the ultra-stimulative policies crafted to battle the financial crisis.

In a statement shortly after the stock market closed, the Fed said it would raise its discount, or primary credit rate, to 0.75% from 0.5% effective on Friday.

At the same time, however, the Fed sought to counter the impression that its decision indicates an imminent tightening of its target interest rate, saying. "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."

I guess you guys are either loaded to the gills with index calls and still haven't recovered..or..you aren't holding any and find this news to be basically irrelevant.....which it actually is in the context of having any meaningful effect on interest rates. The are banks flush with reserves...how much borrowing is taking place at the discount rate anyway ?

Last night's after-hours IMF Gold sales announcement was basically a fail today...and tonight we get the AH rate hike announcement. What will it be tomorrow should Gold begin to reverse course heading into the weekend ?

Managing Perceptions: Fed Raises Discount Rate After the Close

One has to wonder why the Fed chose to jawbone at this time. Is this a move to help them with next week's $100+ Billion Treasury auction? We are discounting rumours that the nose counts among the Primary Dealers showed the risk of another 'failed' auction was rising.

Or was this mainly to provide another opportunity for the bullion banks to take the prices down ahead of their option expiration next week? Plan B stands for Bernays.

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I found it pretty interesting OBE1. Almost like an inverse of the august 07 surprise cut on opex (that I like to call the Great Bear Boning). The timing is what I find most interesting. Why couldn't it wait till after the bell on Friday?

Everyone knows interest rates are going to go up. The IRX has been creeping up of late, I've heard more than a few really smart people say that despite popular belief Fed responds to what the market has already done when they move rates on the FFR.

I haven't made a real or even paper trade in a while now so I don't watch things as closely as I used to, but of late I've noticed: rumors of the dollars demise seem to be premature, we're (US) screwed Europe is screwed just as bad if not worse, there is still a metric crap-ton of bad debts out there, and systemic risk has not gone away.

Hi jefwane. Yea , the AH rate hike felt strange , but in retrospect , sandwiching the announcement between yesterday's market close and this morning's better than expected core CPI kinda makes sense. The market had overnight to digest the news (I believe futures eventually stabilized and began to reverse by open) , then the "cool" inflation numbers iced any residual market jitters over continued Fed accommodation.

Announcing the rate hike after a rather subdued inflation report might have appeared contradictory/confusing and really roiled the market. In the end , I think the Fed may have played it correctly , and received full strategic value from the "positive" CPI.

IRX is one facet of the Fed conundrum , underscoring the their need to undermine enthusiasm in the commodities sector....with emphasis on Gold.

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[edit on 19-2-2010 by OBE1]