Updates on Lending Facilities, Fed Funds Rate Among Recent Federal Reserve Actions
The Federal Reserve announced schedules for operations under the Term Auction Facility (TAF) and the Term Securities Lending Facility (TSLF) through January 2010. These schedules are consistent with the Federal Reserve's intention to gradually scale back these facilities in response to continued improvements in financial market conditions. Under the schedules, the Federal Reserve will continue to offer $75 billion per 28-day TAF auction through January to ensure that an adequate volume of funding is available in the period leading up to and over year-end. Consistent with recent improvements in conditions in secured financing markets, the amounts offered in TSLF auctions will be scaled back further from their current size of $75 billion. TSLF offerings will be reduced to $50 billion in the October auction and to $25 billion in the November, December, and January auctions in the current 28-day cycle of auctions.
The Federal Reserve Board issued a revision to Regulation S, which sets the rates and conditions under which a government agency must reimburse a financial institution for costs incurred in producing customer financial records under the Right to Financial Privacy Act. The revision, which becomes effective Jan. 1, 2010, changes Regulation S in several ways. Most significantly, it increases substantially the personnel fees chargeable for searching and processing document requests.
The Federal Open Market Committee (FOMC) announced following its meeting on September 22–23 that it will maintain the target range for the federal funds rate at 0 to 0.25 percent. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. The FOMC said it will gradually slow the pace of these purchases to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. The Federal Reserve's purchases of $300 billion of Treasury securities, as previously announced, will be completed by the end of October 2009.
September 30, 2009