Interest Rates

There are several different kinds of interest rates. Here is a description of a few. The discount rate is controlled by the Fed and it is always lower than the federal funds rate. It is the interest rate charged by the Federal Reserve when banks borrow overnight from the Fed. For the most part, only large banks borrow directly from the Fed which means they get the benefit of being able to borrow at the lower discount rate.

The federal funds rate is the interest rate charged by banks when banks borrow overnight from each other. The federal funds rate will fluctuate according to supply and demand. It is not under the direct control of the Fed, but it is strongly influenced by what Fed does. The federal funds rate is adjusted by the Fed through open market operations.

The prime rate is what a bank gives to its' best customers. Commercial banks will most often off the same prime rate, but there is no single prime rate set. The Fed influences the prime rate indirectly because changes in discount rates affect the prime rate.

You can find more rate info at Bloomberg.com.