Question

compare and contrast the federal funds rate, the discount rate and the prime rate.
answer in 3 sentences and do not plagiarize

Answer 1

The federal funds rate is the interest rate at which banks lend reserves to each other overnight, while the discount rate is the interest rate that banks pay when they borrow directly from the Federal Reserve, usually on a short-term basis. In contrast, the prime rate is the interest rate that banks offer to their most creditworthy customers for loans, typically influenced by the federal funds rate but set independently by financial institutions. While the federal funds rate and discount rate are key tools for monetary policy and directly set by the Federal Reserve, the prime rate reflects the competitive lending environment among banks.