HispanicBusiness

Last Thursday, after the markets closed, the central bank of the United States, known as the Federal Reserve, announced a slight increase in the discount rate, the interest it charges in short term lending to banks. Markets reacted with an immediate fall in stock futures, perhaps perceiving the decision as the first of a set of interest rate increases the Federal Reserve, at some point, will have to decide.

However, Friday the markets regained their upward trend, given several reassurances by Federal Reserve officials. For instance, the change in the discount rate by a quarter of a percentage point, from 0.50 percent to 0.75 percent, was described by the Federal Reserva Bank of New York President, William Dudley as a "very small technical change."

News about almost nil inflation in January, released by the Labor Department on Friday, coupled to the 9.7 percent unemployment rate, certainly help the perception that the Federal Reserve can wait before starting to tighten monetary policy. Still, the slight increase in the discount rate came as a surprise, because it was announced between formal Federal Reserve meetings.

Almost everybody recognizes that the Federal Reserve, at some point, will have to tighten monetary policy, bringing to an end the extraordinary measures approved to confront the Great Recession. However, nobody anticipates the precise timing and sequence in which that process will take place. The hope is that the Federal Reserve will avoid the extremes of tightening too early, causing a relapse, or too late, generating inflation.

Isaac Cohen is the former director of the Washington Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He is a commentator on economic and financial issues for CNN en Espanol TV and radio.