Fed Discount Window Borrowing Increased 133% from Last Week
The Fed is no longer extending new bank loans via the BTFP. However, we can see from the chart below that bank borrowing from the Fed Discount Window has significantly increased from last week.
Last week’s Primary Credit outstanding was $2.7 billion. This week that figure increased 133% to $6.3 billion.
Bank Discount Window borrowing is well below the March 2023 high of $153 billion. However, as BTFP loans mature and as banks continue to carry large unrealized losses (given elevated interest rates), many banks will be forced to find liquidity via the Fed’s Discount Window.
Discount Window borrowing ought to be viewed as a sign of bank weakness regardless of the Fed’s propaganda. Banks that require Fed loans will likely pull back on extending credit until they have sufficient liquidity on hand. A slowdown in bank credit will lead to a slowdown in economic growth.
