Discount rate

Definition

The discount rate is the interest rate set by the Federal Reserve that banks are charged to borrow short-term funds directly from the Federal Reserve itself. It is a tool used by the Federal Reserve to help manage the U.S. economy's money supply and influence overall economic activity.

Related terms

Federal Reserve System:

The central banking system of the United States, responsible for setting monetary policy, including the discount rate.

Monetary Policy:

A set of actions undertaken by a nation's central bank to control the money supply and achieve sustainable economic growth.

Interest Rates:

Charges levied on borrowed money, which can influence consumer spending and economic growth