The Federal Reserve has raised an interest rate it charges banks for emergency loans, thus beginning the process to wean the banking industry from government assistance while simultaneously trying to convince the public that the move does not represent an imminent tightening of credit.

 On Feb. 19, the Fed officially increased the discount rate charged to banks for direct loans by a quarter point to 0.75 percent.

 “(This change is) intended as a further normalization of the Federal Reserve’s lending facilities,” the central bank said in a Feb. 18 news release. “The modifications 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.”

 Despite the Fed’s reassurances, stock futures and bond prices fell, and the dollar rose against the euro as economists saw the central bank’s move as a “shot across the bow,” according to a Feb. 19 story in The Wall Street Journal.

 With the Fed’s announcement, the gap between the fed-funds rate – which as a Fed-influenced rate dictating what banks charge each other on overnight loans serves as one of the central bank’s main policy tools – and the discount rate will now be a half percentage point, up from a quarter percentage point.

 Before the crisis, the discount rate was a full percentage point above the fed-funds rate, a penalty meant to discourage banks from using it except in extreme conditions. In the early stages of the financial crisis in August 2007, the Fed had greatly reduced the gap between the two rates to encourage banks to borrow, according to the Journal.

 But now, with financial institutions’ reliance on Fed credit waning as market liquidity continues to improve, the Fed felt the time was right to act. Fed governor Elizabeth Duke justified her agency’s policy changes in remarks she delivered on Feb. 18.

 "I'd emphasize that the changes are simply a reversal of the spread reduction we made to combat stigma,” Duke said. “And like the closure of a number of extraordinary credit programs earlier this month, represent further normalization of the Federal Reserve's lending facilities."