Fed's Emergency Loan Program Sees Crucial Rate Hike The Federal Reserve’s emergency lending program, the Bank Term Funding Program (BTFP), witnessed a surge in demand, reaching a record $167.8 billion in borrowing as of January 24. This spike, approximately $6.3 billion higher than the previous week, came just before the Fed raised the program’s interest rate to prevent financial institutions from exploiting its favorable terms for arbitrage. Initially, the BTFP’s borrowing rate of around 4.88% was significantly lower than the rate for parking reserves at the Fed, leading to a risk-free arbitrage opportunity for institutions. However, this loophole was closed with the Fed’s decision to align the BTFP borrowing rate with that of reserve balances, effectively ending the advantageous trade. « Previous Article Next Article » Share This Article Choose Your Platform: Facebook Twitter Google Plus Linkedin Related Posts I’m an Economist: Here Are My Predictions for Inflation If Trump Wins READ MORE Gold rebound stalls as key market drivers go AWOL READ MORE Oil Prices Waver Amid Economic Uncertainty and Interest Rate Speculation READ MORE US Debt and the Rising Specter of Bond Vigilantes: A Financial Stability Threat? READ MORE Add a Comment Cancel replyYour email address will not be published. Required fields are marked *Name * Email * Save my name, email, and website in this browser for the next time I comment. Comment