Increases of 0.25% in the rates depository institutions pay to the Federal Reserve Banks on short-term credit – primary and secondary – and the rate of interest paid on the institutions’ reserves with the Fed banks were approved in recent amendments to the Federal Reserve’s Regulations A and D.
The rule changes, which conform with the Fed’s May 3 approval of a higher federal funds target rate (up a quarter point to a range of 5% to 5-1/4%) were effective May 11, when the changes were published in the Federal Register. The associated rate increases were applicable as of May 4, the notices state.
The Fed Board revised Regulation A to raise its primary credit rate to 5.25%; a mechanism in the rules effected a corresponding increase in the secondary credit rate to 5.75%. Meanwhile, the central bank increased the rate of interest paid under Regulation D on institutions’ reserves with the Federal Reserve Banks to 5.15%.