US Fed to hold 21-day term deposit facility operations

[NEW YORK] The Federal Reserve said on Monday it planned to hold three weekly operations that offer banks the chance to deposit money with the central bank for 21 days in a bid to test its readiness when it decides to raise interest rates.

The term deposit facility is one of the tools the Fed has said it will use to reduce cash in the banking system to achieve its interest rate target.

The latest series of TDF operations will be conducted on Feb 5, Feb 12 and Feb 19, the Fed said in statement.

The operations will offer 21-day, floating-rate deposits with the maximum individual award amount set at US$20 billion, and the rate set equal to the sum of the interest rate on excess reserves plus a fixed spread of 3 basis points.

The interest rate the Fed currently pay banks on its excess reserves is currently 25 basis points.

The previous set of TDF operations were held in October to December with the last one worth a record US$402.153 billion in seven-day deposits.

REUTERS