FED RATE MOVE SENDS DOLLAR HIGHER
19 febrero 2010
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Published by The New York Times, US
Washington, Feb 19- The Federal Reserve’s decision to raise the interest rate it charges on short-term loans to banks reverberated in the financial markets Friday, sending overseas stock indexes lower and giving fresh momentum to a recent rise in the dollar.
The Fed took the move to normalize lending after holding interest rates to extraordinary lows for more than a year to prop up the financial system.
But the decision, announced after the close of equities markets in New York, sent Asian shares lower, with the Nikkei 225 index in Tokyo dropping nearly 2 percent, and both the Kospi index in Seoul and the Hong Kong’s Hang Seng indexes showing similar declines.
The reaction in Europe, however, was much more muted, with the major indexes in Frankfurt, London and Paris regaining lost ground in afternoon trading.
Shares in Europe turned positive after a report from Washington that indicated only a slight increase in consumer prices in January. In fact, excluding food and fuel costs, prices actually fell 0.1 percent — the first decrease since 1982. Wall Street, which has gained more than 2 percent for the week, is also expected to open slightly lower.
The move also helped propel the dollar’s recent rise even further, reaching $1.35 to the euro, its strongest level against that currency in nine months.
While the central bank had signaled its intentions to take such a step, the timing was a surprise.
The announcement was made in a carefully worded statement that emphasized that the Fed was not yet ready to begin a broad tightening of credit that would affect businesses and consumers as they struggle to recover from the economic crisis.
But while the move will not directly affect home mortgage, credit card or auto loan rates, it was a clear sign to the markets, politicians in Washington and the country as a whole that the era of extraordinarily cheap money necessitated by the crisis was drawing gradually to a close.
The Fed’s board of governors raised the discount rate on loans made directly to banks by a quarter of a percentage point, to 0.75 percent from 0.50 percent, effective Friday.
It also took two steps to begin unwinding its efforts to keep the banking system functioning after the real estate bubble inflicted huge losses that were amplified by sophisticated bets made by Wall Street.
Washington, Feb 19- The Federal Reserve’s decision to raise the interest rate it charges on short-term loans to banks reverberated in the financial markets Friday, sending overseas stock indexes lower and giving fresh momentum to a recent rise in the dollar.
The Fed took the move to normalize lending after holding interest rates to extraordinary lows for more than a year to prop up the financial system.
But the decision, announced after the close of equities markets in New York, sent Asian shares lower, with the Nikkei 225 index in Tokyo dropping nearly 2 percent, and both the Kospi index in Seoul and the Hong Kong’s Hang Seng indexes showing similar declines.
The reaction in Europe, however, was much more muted, with the major indexes in Frankfurt, London and Paris regaining lost ground in afternoon trading.
Shares in Europe turned positive after a report from Washington that indicated only a slight increase in consumer prices in January. In fact, excluding food and fuel costs, prices actually fell 0.1 percent — the first decrease since 1982. Wall Street, which has gained more than 2 percent for the week, is also expected to open slightly lower.
The move also helped propel the dollar’s recent rise even further, reaching $1.35 to the euro, its strongest level against that currency in nine months.
While the central bank had signaled its intentions to take such a step, the timing was a surprise.
The announcement was made in a carefully worded statement that emphasized that the Fed was not yet ready to begin a broad tightening of credit that would affect businesses and consumers as they struggle to recover from the economic crisis.
But while the move will not directly affect home mortgage, credit card or auto loan rates, it was a clear sign to the markets, politicians in Washington and the country as a whole that the era of extraordinarily cheap money necessitated by the crisis was drawing gradually to a close.
The Fed’s board of governors raised the discount rate on loans made directly to banks by a quarter of a percentage point, to 0.75 percent from 0.50 percent, effective Friday.
It also took two steps to begin unwinding its efforts to keep the banking system functioning after the real estate bubble inflicted huge losses that were amplified by sophisticated bets made by Wall Street.
