THE ECONOMY.(TO THE POINT)

Fed alters way it lends to banks

Under rules that take effect Jan. 9, short-term loans to banks will no longer be at the discount rate, now a half point below the 1.75% fed funds target. Banks in sound condition will borrow at a primary rate, one point above the fed funds rate. The rate for less-sound banks will be a half-point higher. But in emergencies the Fed could lower the primary rate to the fed funds rate.

** The Fed changes make it easier to borrow from the Fed by scrapping a rule that banks first exhaust other available sources of funds. But the changes don't represent a monetary easing or tightening.

** The 30-year fixed-rate mortgage fell to 6.13% this week from 6.31% the prior week. The 15-year mortgage fell to 5.51% from 5.70%. The one-year adjustable-rate mortgage fell to 4.30% from 4.25%.

** The Employment Cost Index rose 0.8% in Q3 from Q2. The ECI's 3.7% hike from a year ago was the smallest in two years. Wages rose 0.5% in Q3, half Q2's increase. They rose 3.2% from Q3 '01. Health care and other benefit costs rose 1.4% from Q2 and 4.8% from a year ago.

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