The U.S. Fed (Federal Reserve Board) increased the discount rate charged to banks for direct loans whereas the chairman Ben Bernanke assured that the Fed and the central bank is aware of the joblessness in United States of America. It is said that the move will cheer financial institutions to rely more on money market treasuries rather than the state bank for liquidity requirements.
The dollar bulled as the Fed retreated gradually from its extraordinary actions to arrest the deepest financial crisis since the great depression. The Fed has released hundreds of billions of dollars in backstop credit to banks, commercial paper borrowers, bond dealers and anxious financial institutions. Our financial advisory division has stated the rise in discount rate as “nonsense” because of high inflation and joblessness. The U.S. economy hasn’t yet recovered completely from financial crises and the expenditure in Afghan and Iraq war is making the situation worst. The act of raising the discount rate is a fraction of a broader move to pull back the extraordinary aid fed provided to fight the financial crisis.