What is the interest rate called that the Federal Reserve suggests for member banks lending to each other?

The interest rate referred to in this question is significant because it represents the cost at which member banks can lend reserves to one another overnight. This rate is termed the federal funds rate. It serves as a key tool in monetary policy, influencing overall economic activity, including consumer interest rates and the availability of credit.

The federal funds rate is especially important as it affects liquidity in the banking system—when this rate is low, banks are more likely to borrow and lend money, which can stimulate economic growth. Conversely, a high federal funds rate can discourage borrowing, slowing economic activity. The Federal Reserve's decision to set the federal funds rate directly impacts monetary policies that guide the economy.

In contrast, the discount rate is the interest rate that banks pay to borrow directly from the Federal Reserve, usually at a higher cost than the federal funds rate. Meanwhile, the prime rate refers to the interest rate banks charge their most creditworthy customers and is generally influenced by the federal funds rate but is not set by the Federal Reserve. The consumer rate typically pertains to rates charged on loans to consumers, further reflecting broader economic conditions but not encapsulating interbank lending specifically. Therefore, the federal funds rate is the precise term for the context of lending between member banks.