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.

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

Next, lower rates increase the net present value of companies with distant earnings, by reducing the discount rate in valuation models.

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Robo-taxis and robots are worth more than they used to be, and Murphy also used a lower discount rate to value shares.

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Many clubs offer a discount rate to younger members.

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It has also announced new discount rates to sit alongside the cash caps announced at the Budget.

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Housing associations are not-for-profit organisation that own, manage and build rental housing - often renting at discount rates.

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