Federal Reserve Raised Discount Borrowing Rate to 75 Basis Points

In a late afternoon announcement, the Fed increased the discount window borrowing rate from 0.5 percent to 0.75 percent. Traditionally the discount window is 50 bps above the Fed Funds rate, so this move restores the spread back to its traditional size.

In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight.

Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 0.25 percentage point to 0.5 percent. The final TAF auction will be on March 8, 2010.

This move suggests the Fed is returning to a non-crisis operating mentality stating, “these changes are intended as a further normalization of the Federal Reserve’s lending facilities.” The full Fed statement can be read at the source link.

10.02.18 (Source: Federal Reserve)