Primary and Secondary Credit Rates Approved
January 8, 2003
Circular No. 11490

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

In a press release, the Federal Reserve Board announced the approval of the primary and secondary credit rates of 2¼ percent and 2¾ 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 1¼ percent for the federal funds rate is 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.

Questions on this matter may be directed, at this Bank to William A. Walsh, Discount Officer.