discount rate

American  

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.

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discount rate Cultural  

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

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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.

Etymology

Origin of discount rate

First recorded in 1925–30

Compare meaning

How does discount-rate compare to similar and commonly confused words? Explore the most common comparisons:

• discount rate vs. interest rate

Example Sentences

See Examples For:

discount rate

Stock prices reflect earnings growth, paired with the broader economy’s strength and measured with a discount rate tied to the Fed.

From Barron's ● Jun. 23, 2026

Policymakers left the benchmark discount rate at 2.000%, in line with the forecasts of most economists surveyed by The Wall Street Journal.

From The Wall Street Journal ● Jun. 18, 2026

A lower discount rate also increases the present value of a company’s future cash flow, allowing it to fetch a higher valuation.

From MarketWatch ● Jan. 31, 2026

That changed on Black Friday, when the discount rate began to peak at 30% in the U.S., he said.

From Seattle Times ● Nov. 26, 2023

Whatever may be the discount rate, among the bills discounted there will be found but few with the signatures of the Rothschilds, the Hottinguers, and other houses of the same rank.

From Readings in Money and Banking Selected and Adapted by Chester Arthur Phillips