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Release Date: January 6, 2003

For immediate release

The Federal Reserve Board announced Monday it has approved requests by the twelve Federal Reserve Banks to establish primary and secondary credit rates of 2-1/4 percent and 2-3/4 percent, respectively, effective January 9, 2003.

These discount rates are the interest rates that depository institutions will be charged for credit extended under the Federal Reserve's new primary and secondary credit programs that the Board approved on October 31, 2002. These programs replace the adjustment and extended credit programs, which will be discontinued as of January 9.

The Federal Open Market Committee's current target of 1-1/4 percent for the federal funds rate was not affected by this action. Thus, the establishment of the new discount rates does not represent a change in the stance of monetary policy, and the general level of market interest rates should not be affected.

Primary credit will be available for very short terms as a backup source of liquidity to depository institutions that are in generally sound financial condition in the judgment of the lending Federal Reserve Bank. Based on their current financial condition, most depository institutions will qualify for primary credit at the outset of the program. Secondary credit will be available in appropriate circumstances to depository institutions that do not qualify for primary credit. The seasonal credit program is unchanged.

Reserve Banks will establish rates on primary, secondary, and seasonal credit at least every two weeks, subject to review and determination by the Board of Governors, through the same procedures that have been used in the past to set the rates on adjustment, extended, and seasonal credit.

2003 Monetary policy

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Last update: January 6, 2003