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Fed Meets on Discount Rate, Says Little

The Federal Reserve meets on Monday about the discount rate, but issues no announcement about an increase in the discount rate level.



) -- The Federal Reserve Board of Governors met on Monday morning, but there has been no formal announcement of any change in its discount rate policy. The discount rate is at 0.75%. In February, the Federal Reserve last increased the discount rate by 25 basis points.

Some analysts have been expecting an increase of as much as 50 basis points in the discount rate, to 1.25%. The spread between the 1.25% discount rate level and the target range of the fed funds rate would be 100 basis points -- the same spread that existed before the money market fund implosion of 2007.

The discount window -- the interest rate charged to commercial banks and other depository institutions on emergency loans, usually overnight loans -- does not have the same market influence as the fed funds rate. However, the market has been paying more attention go the Fed's discount rate policy as a sign of government confidence in more normalized markets, and there had been interest in the Fed meeting on Monday amid the slew of more positive data in recent days on the job market and U.S. housing sales.

The February increase in the discount rate was described by the Federal Reserve Board as a decision made "in light of continued improvement in financial market conditions" and as a "further normalization of the Federal Reserve's lending facilities."

The Fed has stressed in the past that changes to the discount rate 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.

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The Monday meeting was a regular meeting of the Fed's Board of Governors, and while the market was abuzz with predictions that the Fed would use the meeting as a chance to raise discount rates, these meetings are held by the Fed every few weeks, usually without any change in policy.

Tuesday, the minutes of the Fed's March 16 Federal Open Market Committee meeting will be released.

-- Reported by Eric Rosenbaum in New York.

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