Fed Makes First Interest Rate Move

Washington, DC, Feb. 19, 2010--The Federal Reserve on Thursday raised an emergency lending rate it charges banks, its first interest rate move since 2008.

The Fed characterized its decision to raise the discount rate to 0.75 percent from 0.5 percent as a response to improved financial market conditions.

The discount rate shouldn't be confused with the federal funds interbank lending rate, the Fed's main monetary policy tool, which remains unchanged near zero percent to help sustain a fragile U.S. 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 press release.

"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.

The decision, requested by all 12 regional Fed banks and approved unanimously by the central bank's board in Washington, takes effect on Friday.

Financial markets viewed the announcement as presaging an eventual policy shift.