The prime rate and other interest rates offered by banks
The prime rate, and other interest rates, offered by banks often change in the same direction as a change in the Fed’s target for the federal funds rate. As an employee of a Federal Reserve District Bank you have been told that your District Bank will be increasing its discount rate early next week. Expectations are that an increase in the discount rate will lead to an increase in the federal funds rate, which will lead to an increase in the prime rate and other bank lending rates. You have been thinking about buying a new automobile for the past couple of months. Given this information of a planned discount rate increase, you are considering buying your new automobile before the end of the week. What are the ethical issues, if any, involved in this scenario? What would you do?
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