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

On Thursday, it did just that for a seventh consecutive meeting, keeping its benchmark discount rate at 2.000%, in line with expectations of all economists surveyed by The Wall Street Journal.

From The Wall Street Journal

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

From MarketWatch

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

From Barron's

Many clubs offer a discount rate to younger members.

From The Wall Street Journal

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

From BBC