The discount rate is the interest rate banks must pay the Federal if they borrow other reserves from the Fed. Banks that are in need of additional reserves usually borrow these reserves from other banks in the federal funds market. The federal funds market interest rate, the federal funds rate, is known through by supply and demand. The Fed typically sets the discount rate above the federal funds rate to discourage bank borrowing from the Fed. Normally the discount rate is set one percentage point above the federal funds rate, but beginning in the fall of 2007 the Fed, in response to the financial crisis, abridged the spread between the discount rate and the federal funds rate.