Fed revises pricing on municipal liquidity facility

(Reuters) - The Federal Reserve on Tuesday revised the pricing on the $500 billion Municipal Liquidity Facility, a program launched during the coronavirus pandemic to support state and local governments struggling because of the crisis.

The Fed said it would lower the interest rate spread on tax-exempt notes by 50 basis points for each credit rating category. The U.S. central bank also said it was reducing the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes.

"Today's changes will ensure the MLF continues to provide an effective backstop to assist U.S. states and local governments as they weather the pandemic," the Fed said in a statement. As of the end of July, Illinois was the only state or local government to tap the Fed’s program with a $1.2 billion borrowing.

(Reporting by Jonnelle Marte; Editing by Leslie Adler)

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