The Federal Reserve Increased the Discount Interest Rate

The Chief economist from the Bank of America in New York, Mickey Levy, believes that the decision adopted by the Federal Reserve two days ago, when increasing the discount interest rate, shows that “the financial crisis ended, in great part”.

In declarations took by Bloomberg, Levy estimates that “it is time to normalize things”, after the Federal Reserve began to trim the interest rates when lending money to the banks in the beginning of the financial crisis at the end of 2007. The economist points that this movement “doesn’t represent too much, because any bank in a situation without crisis will go to the discount office if doesn’t have problems”.

On Thursday, the Federal Reserve increased for first time since June 2006 the discount interest rates given to the banks with need of liquidity to obtain short therm financement by an increase of 0.25% to the rate of 0.75%.

The Federal Reserve will go further

“The Federal Reserve, during the financial crisis, lowered the discount interest rates to increase the liquidity in the system”, highlights Levy. The expert points that “now we must retreat the aids to obtain liquidity, given that we aren’t in the financial crisis”. For that reason, Levy points that “It’s normal the movement to the normality in the difference among the general interest rate and the discount interest rate”.

Levy assured that central banks will increase the federal interest rates “when they be convinced of that the economic recovery is sustainable”. Since December 2008, the interest ratel is in his

lowest level in all the History, among a 0% and a 0.25%

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