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.

discount rate

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

Notes

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 .

Word History and Origins

Origin of discount rate¹

First recorded in 1925–30

Example Sentences

It could reduce the discount rate — the rate at which banks borrow money from the central bank — to, say, -3%, while still keeping the Fed Funds rate in positive territory.

From Axios

What discount rate do consumers use to weigh higher purchase cost now vs. fuel cost savings in the future?

From The Daily Beast

Someone who doesn't know the difference between the fed funds rate and the discount rate.

From The Daily Beast

Then began a renewal of a demand for gold from the Continent, and the discount rate rose to 2-15/16.

From Project Gutenberg

Such a situation would doubtless lead to a sharp advance in the discount rate and to the importation of gold.

From Project Gutenberg

The "call rate" is commonly well below the regular "discount rate," or rate for thirty-day, sixty-day, or ninety-day paper.

From Project Gutenberg

This explains why the discount rate on acceptances ranges so low.

From Project Gutenberg