Fed to boost auctions, pay interest on reserves

"The Federal Reserve is substantially increasing the size of the Term Auction Facility (TAF) auctions," the central bank said in a statement.

Specifically, the Fed will boost its 28-day and 84-day TAF auctions to $150 billion each.

The Fed will also begin paying interest on reserves held by the central bank with required reserves receiving a larger payment than excess balances.

Required reserves will be paid interest at a rate of 0.10 percentage point below the federal funds rate. Excess balances held by the Federal Reserve will be paid 0.75 percentage point below the funds rate - although the Fed said that it might yet tinker with that formula.

"Together, these actions should encourage term lending across a range of financial markets in a manner that eases pressures and promotes the ability of firms and households to obtain credit," the Fed said in a statement.

(Reporting by Mark Felsenthal, Editing by Chizu Nomiyama)