US Fed increases rate on loans to banks
0 
The U.S. Federal Reserve on Thursday announced that it was increasing the interest rate it charges on emergency loans to banks to 0.75 percent from 0.5 percent as the financial crisis is easing.
According to a statement released by the Federal Reserve Board, the increase in the discount rate, or the primary credit rate, will be effective on Friday.
"In light of continued improvement in financial market conditions, it had unanimously approved several modifications to the terms of its discount window lending programs, " the Fed said.
The central bank also announced that with immediate effect, the maximum maturity period for primary credit loans would be shortened to overnight.
Primary credit is provided by the Fed and the regional central banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds, the statement said.
The Fed said that easing the terms of primary credit was one of the Federal Reserve's first responses to the financial crisis.
The central bank created the facility in December 2007, when the United States plunged into recession, to further improve the access of depository institutions to term funding.
The Fed also said that it had raised the minimum bid rate for the so-called term auction facility by 0.25 percentage point to 0. 5 percent.
The central bank said the action should not be viewed as a signal that it will soon boost interest rates for consumers and businesses.
The Fed cut the federal fund rate, the leading interest rate, to zero to 0.25 percent in December 2008 and has been keeping it at that level so far.
The Fed repeated its pledge to keep interest rates at historic low levels for an "extended period."
"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 monetary policy," the Fed said.
As the financial market returns stable and the economy began to grow, the Federal Reserve is facing the challenge to undo its policies to tackle the financial crisis.
