discount rate

noun Finance.
1.
the rate of interest charged in discounting commercial paper.
2.
the interest rate charged by Federal Reserve Banks on loans to their member banks, usually against government securities as collateral.
3.
the rediscount rate.

Origin:
1925–30

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Based on the Random House Dictionary, © Random House, Inc. 2014.
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American Heritage
Cultural Dictionary

discount rate definition


The rate of interest charged by the Federal Reserve System on loans it makes to the banking system.

Note: Because the Federal Reserve System lends money to the banking industry, one mechanism it has for regulating interest rates is to vary the discount rate — that is, to make the money that banks borrow relatively more or less expensive. It is likely to lower the discount rate during economic downturns to stimulate investment and raise it during upswings to check inflation.
The American Heritage® New Dictionary of Cultural Literacy, Third Edition
Copyright © 2005 by Houghton Mifflin Company.
Published by Houghton Mifflin Company. All rights reserved.
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Example sentences
The discount rate is usually higher than the federal funds rate.
Instead of adding up the future gains from interest rates, you discount future
  cash flows by a discount rate.
B sell securities on the open market and raise the discount rate.
The economics of climate change boils down to one important factor: the choice
  of discount rate.
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