ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A bank borrows from another bank’s reserve if it is short of cash at the end of the day. That’s where the FFR comes in. It’s the rate that banks charge each other for overnight loans. The Fed maintained its target FFR range at 0% to 0.25% in January 2022, then increased it to 0.25% to 0.50% in March 2022.

Detailed explanation-2: -The Federal Open Markets Committee (FOMC) sets the federal funds rate-also known as the federal funds target rate or the fed funds rate-to guide overnight lending among U.S. banks. It’s set as a range between an upper and lower limit. The federal funds rate is currently 4.50% to 4.75%.

Detailed explanation-3: -For example, revenues derived from taxes, licenses, fees, and fines. Money received directly from the federal government will be classified as federal funds.

Detailed explanation-4: -The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility-the discount window.

Detailed explanation-5: -Federal funds, often referred to as fed funds, are excess reserves that commercial banks and other financial institutions deposit at regional Federal Reserve banks; these funds can be lent, then, to other market participants with insufficient cash on hand to meet their lending and reserve needs.