ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the interest rate charged for overnight loans between banks.
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the rate at which the Federal Reserve is able to supply money to its banks.
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the interest rate charged on personal loans.
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None of the above
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Detailed explanation-1: -The Federal Funds Rate (FFR) is the average rate that banks pay when borrowing from each other overnight. At its December meeting, the Federal Reserve announced that it would increase its target for the FFR by 25 basis points to a range of 4.50%-4.5%.
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. The FOMC sets a target federal funds rate eight times a year, based on prevailing economic conditions.
Detailed explanation-3: -Overnight Federal Funds Rate is at 4.57%, compared to 4.57% the previous market day and 0.08% last year. This is lower than the long term average of 4.60%.
Detailed explanation-4: -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-5: -Detailed Solution. The correct answer is Marginal Standing Facility Rate. Marginal Standing Facility (MSF) rate is the rate at which the scheduled banks borrow funds overnight from RBI against the Government securities.