Markets See Volatile Moves After Fed Raises Discount Rate

Put your money under your mattress. No, but seriously, buy gold


NEW YORK (Dow Jones)--The dollar jumped sharply while Treasurys and stock futures fell after the Federal Reserve late Thursday raised the rate it charges banks for emergency loans by a quarter percentage point.

The Fed stressed the changes are not expected to lead to tighter financial conditions for households and businesses, and do not signal any change in the outlook for the economy or for monetary policy.

Still, although the Fed had flagged a likely increase in the rate known as the discount rate, the timing of the move--at 4:30 p.m. EST and between the central bank's regular meetings--took markets by surprise in thin, late-day trading in New York. Analysts said it brought an inevitable tightening in broader monetary policy that much closer.

The euro, which has been under broad pressure against the backdrop of the sovereign debt crisis in Europe, fell to its lowest level since May 18 as the dollar gained across the board. The euro was trading at $1.3478, from $1.3607 late Wednesday, according to EBS via CQG. The dollar was at Y92.03 from Y91.20.

Read More...