Federal emergency loans decline

The Fed reported that daily borrowing from its emergency loan program averaged US$13.73 billion for the week ended Wednesday. That was down by US$43 million from daily average borrowing of US$13.77 billion in the previous week.

At the height of the financial crisis, emergency borrowing from the Fed's discount window had exceeded US$100 billion a day.

The Fed last month increased the interest rate it charges on discount window borrowing by a quarter-point to 0.75 percent as part of efforts to unwind the exceptional support it had been providing to banks during the financial crisis, which struck with force in the fall of 2008.

However, the central bank stressed that the increase in the discount rate charged to make direct loans to banks was not a signal that it planned to increase its target for the federal funds rate which has been at a record low of zero to 0.25 percent since December 2008.

Fed policymakers will meet next Tuesday to review interest rates but there is no expectation that the central bank will move to boost the funds rate, the overnight bank lending rate which affects a wide variety of consumer and business loans. Some economists believe the Fed could leave the funds rate unchanged until late in 2010 to give the economy a chance to recover further from the worst recession since the 1930s.

The central bank is phasing out a number of emergency programs that it had created to deal with the financial crisis.

The Fed's balance sheet -- a broad measure that tracks the Fed's lending activities -- stood at US$2.29 trillion for the past week, more than double the level before the financial crisis struck even with all the moves to phase out various emergency programs.

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