6. The discount window and the federal funds market The discount rate is the interest rate the Fed charges on loans of reserves to banks. The federal funds rate is the interest rate banks charge for overnight loans of reserves to other banks. Which of the following statements about the discount rate and the federal funds rate are true? Check all that apply. A higher discount rate discourages banks from borrowing reserves and making loans. Usually, banks borrow from the federal funds market rather than the discount window. If the federal funds rate is higher than the discount rate, banks may borrow from the discount window. If the Fed wants to expand the money supply, it can raise the discount rate.