The Fed stressed on Thursday that 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”.
“The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a back-up source of funds,” the Fed said.
But economists and strategists differed on how to read the move, which had been anticipated after comments from Fed board members and this week’s minutes from the monetary policy meeting which indicated it was close.
Aaron Kohli, strategist at RBS Securities, said: ”This is more a case of normalisation, rather than a precursor to a change in monetary policy.”
Others considered the discount rate hike as part of the broader “exit strategy” from exceptional measures, which are likely to precede an eventual tightening in monetary policy after months of near-zero interest rates.
Here we go…wheeeeee! Hang on tight everyone, this may be a bumpy ride!
A blast from a squirt gun to deal with a forest fire.