What is the term for the interest rate charged by the Federal Reserve System to borrow money?

The term for the interest rate charged by the Federal Reserve System when it lends money to commercial banks is known as the discount rate. This rate is crucial because it influences the cost of borrowing for financial institutions, which in turn affects overall economic conditions, including consumer loans and mortgage rates.

When banks borrow money from the Federal Reserve, they do so at the discount rate, enabling them to manage liquidity and meet reserve requirements. Changes in the discount rate can impact the availability of credit and the overall money supply in the economy, which is why it is a significant tool for regulating economic activity.

Other terms such as base rate, market rate, and prime rate refer to different concepts in the realm of interest rates. The base rate typically serves as a benchmark established by financial institutions, the market rate is influenced by supply and demand dynamics in the financial markets, and the prime rate is the interest rate that banks charge their most creditworthy customers. Thus, the discount rate is a distinct term associated with the Federal Reserve's operations and monetary policy.