The rate at which banks can borrow from each other's reserve balances is known as the Federal Funds Rate (FFR). In the given scenario, the FFR is already given as 0.5%.
The Discount Rate is the interest rate that the Federal Reserve charges banks to borrow funds on a short-term basis. It is typically set higher than the FFR as a tool for controlling monetary policy.
However, since the given Discount Rate of 1% is higher than the FFR of 0.5%, it is unlikely that banks would borrow from the Discount Window. Instead, they would prefer to borrow from each other's reserve balances at the lower FFR rate of 0.5%.
Therefore, the rate at which banks would be able to borrow from each other's reserve balances in the given scenario is 0.5%.