discount-rate

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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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.
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