In general, the discount rate is set above the federal funds rate to discourage banks from borrowing from the Fed.

Question

Quizplus · Accepted Answer

The discount rate is typically set higher than the federal funds rate as a way to discourage banks from relying too heavily on borrowing from the Fed. This is intended to encourage banks to seek other funding sources first and helps to ensure that the Fed's lending facilities are used only when necessary.

In General, the Discount Rate Is Set Above the Federal