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The interest rate that banks charge one another for the loan of excess reserves is the: Federal fund rate
The cost of borrowing that banks charge each other to lend or lend capital liquidity overnight is defined as the federal funds rate. 11 Banks are mandated by law to keep a specified number of reserves in relation to their depositors. When borrowing costs grow with a higher federal funds rate, financial institutions would be less willing to borrow more money. By tightening monetary policy that impose for credit facilities, bankers pass on such higher borrowing costs to borrowers. Consumption interest rates on loans are typically expressed as an annual percentage rate (APR) (APR). For the privilege to lend their money, lenders will require a certain rate of return. An APR is used, for instance, to quote credit card interest rates. The APR for the mortgage or borrower in the aforementioned scenario is 4.
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