Fed Raises Rate It Charges Banks

FEDERAL RESERVE -- February 18, 2010 at 5:16 PM EDT

Fed Raises Rate It Charges Banks

In its first step to unwind emergency measures put in place during the height of the financial crisis, the Federal Reserve announced late Thursday it was raising the rate it charges banks on emergency loans.

The rise in the discount rate -- to 0.75 percent from 0.50 percent -- will take effect Friday. However, in a statement, the central bank stressed that the increase did not signal a broader tightening of credit for consumers or businesses. According to the statement:

"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)."

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