ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The discount rate is the interest rate a Reserve Bank charges eligible financial institutions to borrow funds on a short-term basis-transactions known as borrowing at the “discount window.” The discount rate is set by the Reserve Banks’ boards of directors, subject to the Board of Governors’ approval.

Detailed explanation-2: -The federal funds rate is the target interest rate set by the FOMC. This is the rate at which commercial banks borrow and lend their excess reserves to each other overnight.

Detailed explanation-3: -The federal discount rate is the interest rate the Federal Reserve (Fed) charges banks to borrow funds from a Federal Reserve bank. The Fed discount rate is set by the Fed’s board of governors, and can be adjusted up or down as a tool of monetary policy.

Detailed explanation-4: -In banking, the discount rate is the interest rate that the Federal Reserve charges banks for short-term loans. Discount lending is a key tool of monetary policy and part of the Fed’s function as the lender-of-last-resort.

Detailed explanation-5: -Open market operations (OMOs)–the purchase and sale of securities in the open market by a central bank–are a key tool used by the Federal Reserve in the implementation of monetary policy.