which is more important the discount rate or fed funds rate 
the federal funds rate is usually considered the more important figure in terms of its overall impact on the economy many other interest rates from mortgages and personal loans to bonds and interest bearing derivatives are set based on the fed funds rate the discount rate is used less frequently and has a more limited impact on overall lending and borrowing in the economy the bottom linethe federal funds rate is the target interest rate at which commercial banks and other financial institutions borrow and lend reserve funds from each other on an overnight basis while the fed sets the target the actual rate is determined by the interbank market the federal reserve may use open market operations omo such as buying or selling government securities to influence the fed funds rate and keep it near its target the discount rate on the other hand is the interest rate at which banks can borrow money directly from the federal reserve s discount window this rate will be set higher than the fed funds rate and serves as a backstop for banks that cannot obtain sufficient funds from the interbank market 