The federal funds rate is the competitively-determined market rate banks charge each other for overnight loans to meet reserve requirements, which the Fed influences by injecting or withdrawing money, whereas the discount rate is administratively set (posted, not a market rate) at which member banks can borrow directly from the Fed's discount window.

definitionpending

Speaker

Russ Roberts

Evidence Quote

federal funds rate is the rate that banks charge each other for overnight loans

Source

Michael Belongia on the Fed 01/11/2010EconTalk
Created: 6/15/2026, 9:37:51 AM

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