Question

1.What is the Federal Reserve Discount Rate? I am not looking for a number in this part of the question

2. What did the Fed do to the discount rate at its emergency meeting on March 15th? I am looking for a numerical response here

3. Why are banks reluctant to borrow from the discount window?

4. What did the Federal Reserve Bank do to alleviate their concern and make banks more comfortable to borrow from the Federal Reserve Bank?

Answer 1

1. The fed discount rate is the financing cost that Federal Reserve Banks charge when they make collateralized advances—generally overnight—to store foundations.

2.On March fifteenth—a Sunday—the Fed cut its benchmark financing cost by a full rate point, bringing it down to the scope of 0-0.25%, as low as it has ever gone. It was the national bank's subsequent crisis cut external a planned gathering in under a fortnight.

3.  In the event that the markdown window successfully restricts vacillations, the Federal Reserve has better authority over momentary rates and liquidity conditions. At the point when the markdown window experiences disgrace, banks are hesitant to obtain from the Federal Reserve in any event, while doing so would be less expensive than getting in the market.

4. Reduce the discount rate for the banks so that banks can lend out more of their reserves.