Archived IMT (2010.03.16)
WILL FED RAISE THE DISCOUNT RATE TODAY? See chart http://chart.ly/q8994a Watch out for a possible 25-bp rate hike in the DISCOUNT rate to 1.00% at todays FOMC meeting, which would raise its differential over the fed funds rate by 0.75%. Such a move would be part of the normalization process to re-establish the spread (differential) between the discount rate and the fed funds back to its original 100-bps, prevailing prior to the start of the easing cycle in August 2007. Such reasoning helps address the question on why the Fed opted for an inter-meeting rate hike in February. The agenda of the Fed may have been to raise the discount rate by 25-bps in each of Feb, March and April (or June).
*** Ashraf's Video Preview of todays FOMC http://bit.ly/aVtRUA
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