**Asian stock markets have fallen after the US Federal Reserve said that it was raising interest rates for emergency bank loans.**The US central bank took markets by surprise when it said late on Thursday that it was lifting the discount rate to 0.75%, from 0.5%.
In Tokyo, the benchmark Nikkei 225 index dropped 2% to 10,123.58. Hong Kong’s Hang Seng fell 2.6% to 19,894.
In London, the FTSE 100 reversed early losses and was up 10 points at 5,335.
‘Further normalisation’
The Fed’s decision is the first unexpected change to either of its key rates since the heights of the financial crisis last year.
“Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalisation of the Federal Reserve’s lending facilities,” the Fed said in a statement.
The Fed did not change its benchmark federal funds rate - which remains at 0.25%.
The discount rate and federal funds rate have usually moved in tandem.
The US dollar also rose following the announcement to a nine-month high against the euro. It was trading at 1.3477 recently, while the UK pound was at $1.5414.
“We think that the Fed discount rate hike will lead to more dollar strength as the market expects the Fed to start thinking about hiking the Fed funds rate this summer,” UBS strategists said in a note.
The Fed also raised the minimum bid on a special programme to boost short-term lending to 0.5%, from 0.25%.