Why did the Federal Reserve change the Discount Window at the beginning of 2003? What are the major objectives of the primary and secondary credit Discount Window facilities?
The restructuring of the Discount Window at the beginning of 2003, including repositioning the discount rate from below the FOMC’s target rate to above the target rate, was designed to improve the window’s operation as a mechanism for implementing monetary policy and as a backup source of funds for individual depository institutions. The primary credit program aids the implementation of monetary policy by: (1) making funds readily available at the primary credit rate when there is a temporary shortage of liquidity in the banking system, thus keeping the actual federal funds rate from rising much above the primary credit rate, (2) making the process of borrowing from the Discount Window administratively easier, and (3) promoting consistency in the lending function across the Federal Reserve System. By minimizing the administration of and restrictions on the use of Discount Window credit, and by limiting extensions of credit to generally sound depository institutions, the primary credit
Related Questions
- Does the Federal Reserve publish information about which depository institutions are allowed to borrow from the Discount Window at the primary credit rate?
- How does the Federal Reserve publish aggregate data on borrowings under the primary and secondary credit programs?
- How do Reserve Banks administer the primary and secondary credit Discount Window programs?
