Fed Hikes Discount Rate to 0.75%

The Federal Reserve has unanimously decided to raise the discount rate to 0.75% from 0.50%. This will increase the gap between the federal funds rate and the discount rate to 0.50%. The Fed wants to encourage deposit institutions to rely on private funding. The Fed is also shortening the max maturity for primary credit loans to overnight as of March 18th. The final TALF auction will be on March 8th. Changes in the discount rate are intended to restore policy back to normalization, and is not expected to create tightening.