Fed raises rate on emergency loan programme to stop arbitrage

Effective immediately, the adjusted interest rate for borrowing will “be no lower” than that of reserve balances in effect on the day the loan is made, the Fed said. — Bloomberg

NEW YORK: The Federal Reserve (Fed) has raised the rate on loans to banks issued under an emergency lending programme launched last year, after borrowing surged in recent weeks as institutions took advantage of the attractive financing terms.

The Fed’s Bank Term Funding Programme (BTFP), unveiled during the regional banking crisis to ease stress in the financial system, will not be extended beyond its March 11 deadline, top officials had signalled earlier this month.