Tags: US | Fed | Exit | Strategy

Fed Launches CD-Like Program for Banks

Tuesday, 15 Jun 2010 01:06 PM

The Federal Reserve has launched a new program that allows banks to set up the equivalent of certificates of deposit at the Fed.

In an operation conducted Tuesday, the Fed says banks will be paid 0.27 percent in interest on 14-day "term deposits" set up at the central bank.

It's a new tool that will help the Fed drain money from the economy when it decides to tighten credit. The Fed has repeatedly said investors shouldn't read the operation as a step toward higher borrowing costs.

A second operation will be conducted on June 28 for 28-day deposits. A third will be held on July 12, offering 84-day deposits.

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