Ben Bernanke, chairman of US Federal Reserve, is expected to explain the reason behind Federal Reserve’s sudden decision to raise its discount rate when he will appear before the financial committee of the House of Representatives on Wednesday this week.
Discount rate, the level at which commercial banks receive emergency loans from the central bank, was hiked by a quarter of a percentage point to 0.75 per cent.
It may be noted here that Federal Reserve’s loose monetary policy has provided a much needed boost to equities’ advance since their record low in March last year.
It was Fed’s first major step to remove some of the monetary easing measures. Fed's concerned move has also triggered speculations that the government can possibly remove economic stimuli.
Speaking on the topic, Brian Bethune from IHS Global Insight said, “Hopefully, Chairman Ben Bernanke's testimony to Congress (this) week will shed some important new light on the Fed's policy intentions.”
The US economy grew by 5.7 per cent during the final three months of last year, up from a growth rate of 2.2 per cent growth in the previous quarter. However, the rising rate of unemployment is proving a tough nut to crack for the Government.
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