DPA

Washington, Feb 19: The Federal Reserve tightened monetary policy Thursday for the first time in more than a year, raising by 0.25 percentage points the discount interest rate at which the US central bank lends directly to commercial banks.

The Fed's discount rate was hiked from 0.5 percent to 0.75 percent. The action was taken "in light of continued improvement in financial market conditions," a statement said.

The more closely watched federal funds rate remains unchanged at a record low of near 0 percent. Neither the federal funds rate nor the discount rate had been altered since December 2008.

Fed Chairman Ben Bernanke had indicated earlier this month that the central bank was considering a monetary policy move, as Wall Street recovered from a near collapse that began in September 2008.

The Fed said it hoped the new rate hike would encourage banks to seek short-term borrowing from private sources rather than the central bank as the financial sector stabilizes.