Primary Credit Rate
The primary credit rate, also known as the primary discount rate, is the interest rate that the Federal Reserve charges to its member banks when they borrow money from the Federal Reserve’s discount window. This rate is set by the Federal Open Market Committee (FOMC) and is usually adjusted at the same time as the federal funds rate. The primary credit rate is typically higher than the federal funds rate, and it is used as a last resort for banks that need to borrow money to meet their reserve requirements.
History of the Primary Credit Rate
The primary credit rate was first established in 1913 when the Federal Reserve Act was passed. The rate was initially set at 3.5%, and it has been adjusted several times since then. The rate was lowered to 1.5% in 2003 during the Great Recession, and it was raised to 2.25% in 2017. The primary credit rate is typically adjusted at the same time as the federal funds rate, but it can be adjusted independently if needed.
Comparison of Primary Credit Rate and Federal Funds Rate
| Rate | Primary Credit Rate | Federal Funds Rate |
|---|---|---|
| Current Rate | 2.25% | 0.25% |
| Minimum Rate | 1.5% | 0.00% |
| Maximum Rate | 3.5% | 0.50% |
Summary
The primary credit rate is the interest rate that the Federal Reserve charges to its member banks when they borrow money from the Federal Reserve’s discount window. This rate is set by the Federal Open Market Committee (FOMC) and is usually adjusted at the same time as the federal funds rate. The primary credit rate is typically higher than the federal funds rate, and it is used as a last resort for banks that need to borrow money to meet their reserve requirements. For more information about the primary credit rate, you can visit the Federal Reserve’s website or the websites of other financial institutions.
See Also
- Federal Funds Rate
- Discount Window
- Federal Open Market Committee (FOMC)
- Reserve Requirements
- Interest Rate
- Monetary Policy
- Federal Reserve Act
- Great Recession
- Banking System
- Money Supply
