Federal Discount Rate
 |
Definition of 'Federal Discount Rate'The interest rate set by the Federal Reserve that is offered to eligible commercial banks or other depository institutions in an attempt to reduce liquidity problems and the pressures of reserve requirements. The discount rate allows the federal reserve to control the supply of money and is used to assure stability in the financial markets. |
 |
Investopedia explains 'Federal Discount Rate'A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in the supply of money in the economy. Conversely, a raised discount rate will make it more expensive for the banks to borrow, and would thereby decrease the money supply. Funds borrowed from the fed are processed through the discount window and the rate is reviewed every 14 days. |
Related Definitions
Articles Of Interest
-
How Interest Rates Affect The Stock Market
Whether you're buying lunch, a home or a stock, you're influenced by interest rates. -
How The U.S. Government Formulates Monetary Policy
Learn about the tools the Fed uses to influence interest rates and general economic conditions. -
Who determines interest rates?
In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of interest rate determination, the government's economic observers create ... -
How do central banks acquire currency reserves and how much are they required to hold?
A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign exchange reserves. Reserve currencies usually also become the international ... -
The Federal Reserve
Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy. -
Introduction To Coincident And Lagging Economic Indicators
Investors can learn a lot, or very little, from these indicators once they know how to use them. -
How Risk Free Is The Risk-Free Rate Of Return?
This rate is rarely questioned - unless the economy falls into disarray. -
Top 4 Most Scandalous Insider Trading Debacles
Here we look at some of the landmark incidents of insider trading. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves. -
Open Market Operations Explained
The term “open market operations” refers to a monetary policy tool in which central banks buy and sell bonds to regulate the money supply in the economy. The United States employs open market ...
Free Annual Reports