Directly controlled by the Federal Open Market Committee (FOMC), the discount rate is the interest rate charged to banks to borrow money from the Federal Reserve usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions. This is different from the Fed Funds Rate as that is the rate that banks lend to each other.
The Discount Rate has run about 1% higher than the Fed Funds Rate during the recent past and therefore is not used all that often unless in large quantities during an emergency.
