US fed funds rate slips to lowest in four weeks

[NEW YORK] A key overnight borrowing cost for US banks slipped to its lowest level in nearly four weeks on Tuesday, as money market rates have fallen on expectations the Federal Reserve might raise interest rates later than some economists had forecast, Fed data released on Wednesday showed.

A snowstorm that swept across the northeastern United States on Monday and Tuesday reduced trading activity and demand for cash to finance trades, analysts said.

The effective or average interest rate on federal funds, the cost for banks to borrow excess reserves from each other, was 0.11 per cent, down from 0.12 per cent on Monday.

This was the lowest since 0.06 per cent on Dec 31.

The effective fed funds rate, which the US central bank targets to conduct monetary policy, traded in a range of 0.03 per cent to 0.3125 per cent, according to the Fed.

The Fed adopted a fed funds target of 0.00-0.25 per cent in Dec 2008 at the height of the global credit crisis.

The Federal Open Market Committee is scheduled to release its latest policy statement at 2pm (1900 GMT) after a two-day meeting.

In a Reuters poll conducted on Jan 9, 13 of the top 20 Wall Street firms expected the Fed to end its near-zero interest rate policy by June.

Growing worries that Europe's financial woes and a surging dollar would derail the US economic expansion have raised bets the Fed might refrain from normalizing monetary policy until the latter half of 2015.

REUTERS