WASHINGTON — The Federal Reserve Monday announced it will begin paying interest on depository institutions' required and excess reserve balances in a move the central bank said would give it "greater scope" to address ailing credit markets.
The move, the Fed said, should also help it maintain the federal funds rate close to the target established by the Federal Reserve's policy committee.
It added that it "stands ready to take additional measures as necessary to foster liquid money market conditions."
Additionally, the Fed announced that it is boosting the size of both 28-day and 84-day Term Auction Facility auctions by $150 billion each, starting with Monday's 84-day auction.
"These increases will eventually bring the amounts outstanding under the regular TAF program to $600 billion," the Fed said in a news release.
Meanwhile, the Treasury Department announced that it will make adjustments to its auction calendar.
Treasury is "considering its options regarding the frequency and issuance of additional nominal coupons, including a reintroduction of the 3-year note, beginning in Nov., 2008," it said in an early morning statement. "Any change to the auction calendar will be communicated per standard practice as part of the next Quarterly Refunding announcement on Wed, Nov., 5."