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I’m no economist, and in fact, I had NO CLUE what they were until 2 mins ago:
http://www.thetruthaboutmortgage.com/discount-rate…
Read the 1st & 3rd section (skip “Prime rate”).
Summary: “Discount rate” is the interest (rate) the fed charges banks when they get a temp loan from the fed, to keep their heads above water.
“Fed funds rate” is the amount banks charge one another, to do the same.
The “difference” is 0.50
Fed funds: 0 – 0.25
Discount rate: 0.75
View the rates here:
I am sorry however Mustang received all of it incorrect. His definition of fed reduction cost is virtually the definition of federal funds cost. Alternatively, federal reduction rate is the price that the Fed expenditures banks and other financial/depository institutions to reinforce their fund standards and fortify liquidity.