The interest rate that federal reserve banks charge on loans they grant to commercial banks is called discount rate.
The "discount window," or lending by the Federal Reserve to depository institutions, is a crucial component of the banking system's liquidity and stability as well as the efficient execution of monetary policy. The discount window enables depository institutions to efficiently manage their liquidity risks and prevent acts that have a detrimental impact on their clients, such as withdrawing credit during tense market conditions. As a result, the discount window facilitates the efficient flow of credit to individuals and enterprises. The discount rate is the interest rate that commercial banks and other depository institutions pay on loans they obtain through the discount window of their local Federal Reserve Bank.
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