The Federal Reserve doesn’t actually set the federal funds rate, but rather sets a “target rate” and works to keep it in a given range by buying or selling government bonds. How does market work itself? The Fed prefers banks borrow amongst themselves and use the discount window as a last resort. Weber is a well known inflation hawk who will most likely increase confidence in Euro policy.I think this week could be a turning point for the EUR/USD where the dollar weakens against the Euro.If I have it right the discount rate is a ceiling for the federal funds rate. The soundest institutions receive the "primary credit" interest rate; less-stable but viable institutions receive the "secondary credit" rate, as do institutions with "severe financial difficulties." Many banks avoided the discount window even when they needed it. The Fed offers primary credit on a very short-term basis to institutions that are generally in good financial health. Each has its own interest rate. On Thursday February 18th, the Federal Reserve surprised the markets by raising the discount rate by 25bp to 0.75 percent, sending the U.S. dollar sharply higher against all of the major currencies.

Since January 2003, there have been three types of credit that depositary institutions can acquire at the Fed’s discount window: primary credit, secondary credit, and seasonal credit. The rate may be changed at the meeting if necessary. At that time, the Fed required that banks prove they had no other source of funds. The Fed uses the federal funds rate to control the supply of available funds, essentially controlling inflation.

Time to sell EURUSD and buy USDCHF.From an amateur point of view: was this surprising at all?Kathy, when do you expect FF to go up, I think September ?Let’s see how the bond sales go next week… And whether investors shy away from TIPS and buy up unprotected bonds instead…Rate hike won’t come until end of Q3, beginning of Q4.what would happen when the discount rate is higher than fed fund rate, in this regard keeping the fed fund rate constant?  These rates are usually higher than the fed funds target rate because it prefers that banks borrow from each other and only use the discount window as a last resort.

Ever wonder how the economy goes ’round? Such collateral can include At the same time we now get to hear that Axel Weber will take over after Trichet as ECB president. Conversely, if the discount rate is higher that the federal funds rate, banks will probably borrow from each other rather than from the Federal Reserve. The Federal discount rate is the interest rate the Federal Reserve charges banks to borrow funds, while the federal funds rate is the rate banks charge each other.

Many people do not see the difference between the discount rate and federal funds rate. For example, in early 2012 the primary discount rate was 0.75 percent, while the fed funds rate was targeted in a range from 0 to 0.25 percent.

The discount rate is different from the Federal Funds or overnight lending rate. The discount rate is not an index, so for loans that they make to each other banks use the federal funds rate, without adding a margin. The discount rate is different from the Federal Funds or overnight lending rate. If an institution doesn't meet the eligibility requirements for primary credit, it can try for secondary credit, which has a slightly higher interest rate. I’m also afraid China will show their anger with the meeting between Obama and the Dalai Lama by staying out of the bidding thereby sending a message of unwillingness to finance US debt. In general, banks can rely on the discount window to supply liquidity when normal operations freeze up. What is the difference between the Discount Rate and the Fed Funds Rate? The discount window is further discussed in a 2002 Federal Reserve white paper, which proposes that its purpose is: [Second mortgage vs. home equity loan] Federal Funds Rate (Currently 0.0% – 0.25%) The fed funds rate is a tool to control inflation; It drives all other interest rates; The Fed sets a a target rate (range) by buying or selling government bonds; It’s what banks charge one another for the use of their excess reserves Thanks.I think the US bond sale of $126 billion this week will be difficult… They’ll have to sell to low price/high yield as buyers will count on inflation picking up later in the year.

The discount rate is typically higher than the fed funds rate, so it is used as a last resort by banks that need to borrow. The rate for seasonal credit is an average of selected market rates. His articles have been published in The National Law Review, Mix Magazine, and other publications.

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