Testing of the “exit” at the Federal Reserve

The Federal Reserve awarded $334.714 billion 213 billion pounds of eight-day term deposits to banks, a record amount, at a test auction held on Monday, it said in a statement on Tuesday.  The U.S. central bank allotted them to 90 banks which will receive an interest rate of 0.29 percent.  This was higher than the $316.020 billion in seven-day deposits awarded a week earlier to 85 banks which received an interest rate of 0.28 percent.  [.01% of $300b is $30m at an annual rate, or about $1 m for the 8 days.]  The Fed has ramped up testing of its term deposit facility after the 2008 financial crisis to help policymakers drain cash from the banking system when they decide to tighten monetary policy.On Sept. 4, the Fed said it plans to conduct a series of eight seven-day TDF operations starting in October. These tests will have an early withdrawal feature in which banks can enter the TDF and pull the money out before the maturity date if they pay a charge.

via Fed Awards $335 Billion of Term Deposits in Test Auction – NYTimes.com.

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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