Normally the discount rate is _____ the federal funds rate.

Question

Quizplus · Accepted Answer

The discount rate is typically set above the federal funds rate, which is the interest rate at which banks lend reserves to each other overnight. In the US, the Federal Reserve sets the federal funds rate as part of its monetary policy. The discount rate is the interest rate at which banks can borrow directly from the Federal Reserve. By setting the discount rate above the federal funds rate, the Fed provides an incentive for banks to borrow from other banks before turning to the Fed as a lender of last resort.

Normally the Discount Rate Is _____ the Federal Funds Rate