What is the difference between the fed funds rate and the discount rate? Robert 'Bob' Powell answers this question as part of Decoding Retirement's special segment, Ask Bob.
Chris Ceder, Goldman Sachs Asset Management Senior Retirement Strategist, joined Robert 'Bob' Powell on Decoding Retirement to discuss the financial vortex, whether to delay your retirement, personalized planning and advice, financial wellness programs, AI, and more.
Question:
The Federal Reserve lowered the interest rate back in September, but what is the difference between the fed funds rate and the discount rate?
Answer:
The federal funds rate and the discount rate are both interest rates set by the Federal Reserve, but they serve different purposes in the U.S. Financial system.
The federal funds rate is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight.
The discount rate is the interest rate the Federal Reserve charges commercial banks and other depository institutions when they borrow funds directly from the Fed’s discount window.
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Retirement planning doesn’t mean locking up your money for a rainy day and forgetting about it. Planning your future means reacting to events today. Decoding Retirement gives you the tools to navigate the years ahead, and take action now!
Yahoo Finance's Decoding Retirement is hosted by Robert Powell, and produced by Zach Faulds.
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Editor's note: This post was written by Zach Faulds.