The simple version

Most coverage of Federal Reserve interest rates uses the phrase 'the Fed funds rate' and stops there. The Fed actually controls two related but distinct interest rates. The federal funds rate is the rate banks charge each other for overnight loans of reserves, and the Federal Open Market Committee sets a target range for it. The discount rate is the rate the Fed itself charges banks that come directly to the Federal Reserve's discount window to borrow. On May 26, 2026, the Federal Reserve Board published the minutes of its April 20 and April 29 discount rate meetings, which is the formal record of how each Reserve Bank's board of directors voted on what discount rate to charge in their district.

The discount rate is currently 3.75%. That is the same number as the upper bound of the federal funds target range (3.50% to 3.75%, set by the FOMC on April 29). Since March 2020, the Federal Reserve has set the primary credit rate at the top of the FOMC's federal funds target range as a matter of policy, so the two numbers move together by design. The discount rate matters for what it signals about bank funding conditions, more than for its direct effect on your loan.

The numbers

• Primary credit rate (the discount rate): 3.75%, as of May 27, 2026. (Federal Reserve, H.15 Selected Interest Rates: https://www.federalreserve.gov/releases/h15/)
• Federal funds target range: 3.50% to 3.75%, held unchanged at the April 29, 2026 FOMC meeting on an 8 to 4 vote. (Federal Reserve, FOMC statement, April 29, 2026: https://www.federalreserve.gov/newsevents/pressreleases/monetary20260429a.htm)
• Effective federal funds rate (the actual market rate, as opposed to the target): 3.62% for the period May 20 to 26, 2026. (Federal Reserve, H.15 Selected Interest Rates: https://www.federalreserve.gov/releases/h15/)
• Discount rate meeting minutes released: May 26, 2026, covering meetings on April 20 and April 29, 2026. (Federal Reserve press release: https://www.federalreserve.gov/newsevents/pressreleases/monetary20260526a.htm)
• Since March 2020, the primary credit rate has been set at the top of the FOMC's federal funds target range. (Federal Reserve, Discount Rate page: https://www.federalreserve.gov/monetarypolicy/discountrate.htm)

Why the Fed has two interest rates, and what the discount rate actually does

The federal funds rate and the discount rate exist for different jobs. The federal funds rate is the price of overnight liquidity in the private market, between banks. When Bank A has excess reserves and Bank B has a temporary shortfall, Bank B borrows from Bank A at a rate in the FOMC's target range. The FOMC steers that market rate using open market operations and administered rates like interest on reserve balances.

The discount rate is the price of borrowing directly from the Federal Reserve when the private market is not the right option. A bank might use the discount window because it is operationally simpler at a particular moment, or because private market liquidity has dried up, or because the timing is wrong for an interbank trade. Each of the twelve regional Reserve Banks has its own board of directors that formally requests a discount rate, and the Board of Governors in Washington approves those requests. That is why the discount rate gets its own meeting minutes: it is a separate institutional process, distinct from the FOMC's federal funds decision, even though the two rates are now mechanically linked.

Historically, the primary credit rate sat 50 to 100 basis points above the upper bound of the federal funds target, as a deliberate penalty meant to encourage banks to borrow in the private market first and use the discount window only as a backup. That changed in March 2020, when the Federal Reserve cut the spread to zero during the early phase of the pandemic. The spread has remained at zero since then. The structural meaning is significant: there is currently no extra cost for a bank to borrow directly from the Fed instead of from another bank, beyond the usual stigma of doing so.

The Real Cost lens on consumer borrowing costs at 3.75%

The discount rate is not the rate on your mortgage, your credit card, or your savings account. It does not appear on your bank statement. But it sits inside the same plumbing that determines those rates, so a worked example of where it shows up matters.

• When the federal funds target range is held at 3.50% to 3.75% and the discount rate is held at 3.75%, the prime rate (the published benchmark that banks use for many consumer loans) sits at the federal funds rate plus 3 percentage points, currently around 6.75% to 7.00%.
• On a $100,000 home equity line of credit (HELOC) tied to prime plus 1%, that produces an interest cost of roughly 7.75% to 8.00% APR, or roughly $646 to $667 per month in interest alone if you carry the full balance for a year.
• On a $5,000 credit card balance carried at the average credit card APR near 21.5% in early 2026, the prime rate matters less. Credit card APRs include a much larger margin over prime than HELOCs do, and they have been near record highs even at moderate Fed rate settings.
• On a $10,000 high-yield savings balance at one of the more competitive online banks paying around 3.80% APY, you earn roughly $380 per year in interest. That APY is broadly anchored to the federal funds rate.

The Real Cost lens point is that the discount rate at 3.75% does not change the math on any of those balances by itself. What it tells you is the floor cost of money for the largest, most regulated borrowers in the country, which is the cost they then add a margin to before lending to you. A discount rate at 3.75% is a tighter setting than the near-zero levels of 2020 and 2021, but looser than 2023's 5.50%.

What this means

For a household reader, the practical takeaway from the discount rate minutes is not new policy direction. The Federal Reserve is holding both rates at their current level. The minutes confirm the institutional process is functioning normally, that no Reserve Bank is dissenting on the discount rate decision in a way that would signal a future shift, and that the framework set in March 2020 (parity between primary credit and the federal funds target upper bound) remains in place. If you are watching for signals about whether your mortgage rate, credit card APR, or savings APY is about to change, the FOMC statement and the FOMC minutes are the documents that move markets, not the discount rate minutes.

What the discount rate minutes do tell you is that the Federal Reserve still runs an active discount window, and that the formal governance around that window is intact. In a financial stress event, the discount window is one of the tools the Fed uses to keep healthy but illiquid banks from failing. The fact that the rate is at parity with the federal funds rate means the Fed has removed the historical penalty for using it, which is itself a policy stance about how stigmatized borrowing from the Fed should be.

What this is NOT

This article is not a prediction of when or whether the Federal Reserve will cut rates. It is not investment, tax, or legal advice. It is not a recommendation to refinance any loan, open or close any savings account, or change any allocation in any portfolio. It is not a read on the dissent at the April 29 FOMC vote, which is a separate question covered in the FOMC minutes themselves. Most useful between ages 25 and 65, for anyone who has ever asked why news coverage uses 'the Fed rate' to mean different numbers in different sentences.

Sources

• Federal Reserve, H.15 Selected Interest Rates (current primary credit rate and effective federal funds rate). https://www.federalreserve.gov/releases/h15/
• Federal Reserve, FOMC statement, April 29, 2026 (federal funds target range and vote). https://www.federalreserve.gov/newsevents/pressreleases/monetary20260429a.htm
• Federal Reserve, press release on discount rate meeting minutes, May 26, 2026. https://www.federalreserve.gov/newsevents/pressreleases/monetary20260526a.htm
• Federal Reserve, Discount Rate methodology page (March 2020 parity policy). https://www.federalreserve.gov/monetarypolicy/discountrate.htm