Fed to hold term deposit facility tests

NEW YORK (Reuters) – The Federal Reserve said on Thursday it will resume testing of its term deposit facility with two operations later this month in an effort to ensure the program’s readiness.

The term deposit facility (TDF) is one of the tools the U.S. central bank has said it will use to reduce cash in the banking system to achieve its interest rate target.

The Fed last conducted TDF tests back in February.

The first two operations in this latest series will be conducted on May 21 and May 28 and will offer 14-day and 7-day term deposits, respectively.

“The Federal Reserve plans to conduct similar routine TDF test operations in the coming months. The schedule and terms for future operations will be announced at later dates,” the central bank said in a statement.

They will each offer floating-rate term deposits with the maximum individual award amount set at $5 billion, and the rate set equal to the sum of the interest rate on excess reserves (currently 25 basis points) plus a fixed spread of 1 basis point, it said.

(Reporting by Richard Leong; Editing by Chizu Nomiyama)


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