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

The agency also applies discount rates that place less value on the future benefits of controlling pollution than the present ones, according to the attorneys, who say these practices discriminate against children.

From Los Angeles Times

The agency also applies discount rates to future costs and benefits — a practice adopted in the 1980s during the Reagan administration, she said.

From Los Angeles Times

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

From Seattle Times

The net loss was also impacted by accounting for its underfunded retirements caused by actuarial revaluation and discount rate changes.

From Reuters

The 10-year yield, which can hit stock prices when it rises by varying the discount rate investors use to value companies' future cashflows, has climbed from around 4% in early August.

From Reuters