- the rate of interest charged in discounting commercial paper.
- the interest rate charged by Federal Reserve Banks on loans to their member banks, usually against government securities as collateral.
- the rediscount rate.
Origin of discount rate
First recorded in 1925–30
Dictionary.com Unabridged Based on the Random House Unabridged Dictionary, © Random House, Inc. 2018
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 New Dictionary of Cultural Literacy, Third Edition Copyright © 2005 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.