Analysts Expect Fed To Hike Discount Rate

According to an article on MarketWatch, analysts expect the Fed to hike the discount rate again when they meet today. This would widen the gap between the discount rate and fed funds rate, which is more closely-watched.

The Board of Governors is scheduled to meet today to consider the discount rate charged by Fed banks from emergency-funds-seeking institutions. The discount rate currently stands at 0.75%, according to the Fed. As the discount rate is rarely used nowadays, a change in it does not impact the economy significantly. Moreover, it has ceased to indicate normalization in the financial markets, since the discount rate, which used to be 1% above the fed funds rate, is now just 0.5% points higher.

Joseph Brusuelas of Brusuelas Analytics said, "With markets closed in Europe on Monday and holiday induced light trading session in the US, the Fed is well positioned to increase the discount rate without causing too much collateral damage in global financial markets."

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