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

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

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 ● Dec. 18, 2025

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

The rise in the discount rate attracted foreign capital little by little, and exchange grew easier.

From A Brief History of Panics and Their Periodical Occurrence in the United States by Juglar, Clément