The US Federal Reserve on Thursday made its first interest rate move since December 2008, hiking an emergency lending rate it charges banks, but insisted borrowing costs would not rise for consumers or companies.
The Fed cast its decision to raise the discount rate to 0.75 percent from 0.5 percent as a response to improved financial market conditions that warrant less of a helping hand from the US central bank.
It went to pains to draw a distinction between the discount rate and the federal funds interbank lending rate, its main monetary policy tool, which remains unchanged near zero percent to help sustain a fragile US economic recovery.
“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 Fed said in a statement.
“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,” it said.
Fed officials across the country emphasized that point.
“Monetary policy — as evidenced by the fed funds rate target — remains accommodative,” Atlanta Federal Reserve President Dennis Lockhart said in Augusta, Georgia. Fed Governor Elizabeth Duke echoed the Fed’s message in a speech in Norfolk, Virginia.
The decision, requested by all 12 regional Fed banks and approved unanimously by the central bank’s board in Washington, took effect yesterday.
TAIWAN RESPONSE
Taiwan’s central bank said it will monitor changes in domestic and overseas financial and economic conditions after the US Federal Reserve Board raised the rate charged to banks for direct loans.
The bank will implement the proper monetary policies and measures in response at an appropriate time, it said in a statement released in Taipei yesterday.
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