Fed raises discount window rate

[Diane Monaco]

At 02:20 PM 5/17/2002 -0400, Doug wrote:
>[This is oddly timed. I guess they're not too worried about the banking 
>system, but it's strange in the face of a weak recovery and strains in the 
>credit markets.]
>
>Federal Reserve Seeks Shift in Role
>Fri May 17,12:08 PM ET
>
>By MARTIN CRUTSINGER, AP Economics Writer
>
>WASHINGTON (AP) - The Federal Reserve (news - web sites) on Friday 
>unveiled a significant shift in its operations as the nation's lender of 
>last resort. It proposed making it more expensive for banks to borrow 
>directly from the Fed.

As the dollar continues to weaken, the higher cost of borrowing from the 
Fed is likely to cause commercial banks to sell their short-term securities 
which in turn will lower the price of these securities.  Perhaps this is 
one way to prevent an inevitable capital outflow -- attractively priced 
securities.

Diane