Thursday 18 February 2010

Surprise interest rate rise in the US

In a surprise event, the US Fed has increased its discount rate (the rate banks can borrow from it at) from 0.5% to 0.75% (a 50% increase, to state the obvious - but it looks more significant when you put it in those terms, I think).

Additionally worthy of note is that the loans can only now be made overnight. The money borrowed must be returned to the Fed next day now.

Interesting. Dollar up on this shock news, gold/silver/platinum/etc, plus other major currencies all down hard at the same time as you might expect. Stock markets are not going to like it.

Hmm... its almost like someone WANTS a return to recession for some reason isn't it? Like they want some evidence to justify something they wish to do or reinstate. (Like, say, QE because the economy hits the skids again shortly perhaps...)

Be interesting to monitor what follow-through there is in the various markets on this theme tomorrow and into next week. Especially since it's options expiration week. Particularly worth watching is the gold market, which is currently at a critical juncture where it could technically breakout either to the upside or downside and participants are awaiting their cues as to intermediate-term direction. One might be cynical about the timing of this rate increase and its motives... ;-)

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