The US Federal Reserve said Thursday it was increasing the interest rate it charged on emergency loans to banks in a move to normalize lending after radical measures to jolt the economy from recession. The Fed said the hike in the discount rate, or the primary credit rate, to 0.75 percent from 0.5 percent would be effective Friday and reflected the easing of the financial crisis that resulted from a home-mortgage meltdown. In a statement, the Federal Reserve Board said that 'in light of continued improvement in financial market conditions, it had unanimously approved several modifications to the terms of its discount window lending programs.' With immediate effect, the maximum maturity period for primary credit loans would also be shortened to overnight. Primary credit is provided by the Fed and the regional central banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds, the statement said. The Fed also said that it had raised the minimum bid rate for the so-called term auction facility by 0.25 percentage point to 0.5 percent. The central bank created the facility in December 2007, when the United States plunged into recession, to further improve the access of depository institutions to term funding. The Fed made clear that the changes did not reflect any tightening of monetary policy. '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, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC),' it said. At the January 26-27 meeting, the FOMC, the policy-making body of of the central bank, left its target range for the federal funds rate -- the rate at which the banks charge each other for overnight loans -- at zero to 0.25 percent. It had said that it anticipated economic conditions were likely to warrant exceptionally low levels of the federal funds rate for an extended period. The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the federal funds target range to 0.5 percentage point, the Fed statement said. 'The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserves primary credit facility only as a backup source of funds,' it said. 