ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-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: -Basic Info. US Discount Rate is at 4.75%, compared to 4.75% the previous market day and 0.25% last year. This is higher than the long term average of 1.94%.

Detailed explanation-4: -The discount rate is the interest rate charged by the Fed for loans it makes through the Fed’s discount window. Because banks will not likely borrow at a higher rate than they can borrow from the Fed, the discount rate acts as a ceiling for the federal funds rate.