Fed makes surprising move...

Late last Thursday night the Fed announced that they would be raising the interest rate it charges banks looking for emergency loans. The 25 basis points increase in the discount rate took it to 0.75%. This is a clear signal from the Fed that it thinks that there is some evidence that the US economy is really starting to recover Such a move had been expected at some point in 2010 but the timing caught the markets by surprise. As a result we saw a jump in the US dollar as well as some gains in the major stock market indices. We are probably some way away from a movement upwards in the far more significant Fed Funds Rate but some increase is possible in the early summer. For Fed watchers it is going to be an interesting year ahead.