ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The term discount rate refers to the interest rate charged to commercial banks and other financial institutions for short-term loans they take from the Federal Reserve Bank. The discount rate is applied at the Fed’s lending facility, which is called the discount window.

Detailed explanation-2: -The federal funds rate is the interest rate that banks charge each other to borrow or lend excess reserves overnight. 8 Law requires that banks must have a minimum reserve level in proportion to their deposits.

Detailed explanation-3: -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-4: -Overnight Federal Funds Rate is at 4.57%, compared to 4.58% the previous market day and 0.08% last year.

Detailed explanation-5: -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.