Fed Raises Discount Window Rate to 0.75 percent

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The Federal reserve has raised the discount window from 0.50% to 0.75% effective February 19th. The timing of this release is unusual, and the reasons given point to the Central Bank pushing the Banks to acquire the funds directly in the Money Market for their short term needs.

From the Fed Press Release this afternoon.

The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate (generally referred to as the discount rate) from 1/2 percent to 3/4 percent. This action is effective on February 19.

In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds. Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction will be on March 8, 2010.

US Federal Reserve

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