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Will the Fed Raise the Discount Rate Again?

Economists are speculating that the Federal Reserve may raise the discount rate again during its board meeting on Monday. How will this move impact markets? George Dowd, director at Newedge, shared his insights.

“It wouldn’t surprise me if they moved the discount rate, but I don’t think it really matters,” Dowd told CNBC. “It’s more of a technical adjustment than anything else.”

The Fed surprised the market when it hiked the discount rate by a quarter point to 0.75 percent on Feb. 18.

“It’s more important if we got some change in the statement tomorrow (Tuesday) out of the FOMC that would lead people to believe that they are going to be removing some accommodation, or hiking the Fed fund rates, sooner rather than later,” he said.

“If you look out to June of 2011, you’ve got about 100 basis points of hikes priced in.”

Dowd said the discount rate move signals the Fed trying to get back to a “normalized situation.”

“While I think they may be close to that, I don’t think it has a lot of market impact and I think any eventual hike in the Feds fund is a ways away,” he commented.

  • Watch Dowd's Previous Appearance on CNBC (Mar. 15, 2010)

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Disclosures:

No immediate information was available for Dowd or his firm.

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