Last week’s emergency 0.5% reduction in the federal funds rate target was followed by corresponding reductions in the rate that Federal Reserve Banks will charge on primary and secondary credit and the rate paid on depository institutions’ Regulation D reserves.
The changes, detailed in Federal Register notices slated to publish Tuesday, revised the primary credit rate under the Fed’s Regulation A from 2.25% to 1.75%; additionally, the rate on secondary credit was reduced from 2.75% to 2.25%. These changes were applicable March 4.
Under Reg D, the rates of interest on required reserve balances (IORR) and interest on excess reserves (IOER) were reduced from 1.6% to 1.1%, also applicable March 4.
The fed funds rate cut was implemented March 3 by the Federal Open Market Committee (FOMC), the Fed’s monetary policy setting arm, to help support the economy amid ongoing concerns about the spreading coronavirus (covid-19). The FOMC cut the funds rate target by 0.5% to a range of 1% to 1.25%.
RR: Powell indicates no political pressure in cutting rates in response to economic impact of coronavirus (March 3, 2020)