What is the interest rate charged when a member bank borrows funds from another member bank called?

The interest rate charged when a member bank borrows funds from another member bank is known as the Fed funds rate. This rate is critical in the financial system as it influences the monetary policy of the United States and is a benchmark for other interest rates throughout the economy.

When banks have excess reserves, they lend these to other banks that may need funds to meet reserve requirements. The Fed funds rate is the interest rate at which these overnight loans are made, effectively serving as a tool for the Federal Reserve to help control liquidity and ensure stability in the banking system.

In contrast, the other rates mentioned play different roles: the discount rate is the interest rate the Federal Reserve charges banks for short-term loans, the call rate typically refers to the interest rate on overnight loans in the context of securities, and the prime rate is associated with the rate banks charge their most creditworthy customers for loans. Therefore, the Fed funds rate specifically pertains to the interbank borrowing context.