What is the Fed Funds, Prime and Fed Discount Rates

This video discusses the fed funds rate, prime rate, and the fed discount rate.  The discount rate is the rate at which banks can borrow money directly from the federal reserve bank.

The federal funds rate is the rate at which federal reserve member banks lend out available cash to each other.  The rate may vary between institutions daily and is usually lent out on an overnight basis.  The prime rate is one of the most widely used benchmark rates used by banks to lend out to consumers.  Prime is typically tied to home equity lines of credit and is derived off of the fed funds rate. 

Finally, the discount rate is rate at which federal reserve member banks can borrow money directly from the federal reserve.  The discount rate and the federal funds rate are the two rates set by the federal reserve.