Federal Reserve Discount Rate

Definition

The rate at which member banks may borrow short term funds directly from a Federal Reserve Bank. The discount rate is one of the two interest rates set by the Fed, the other being the Federal funds rate. The Fed actually controls this rate directly, but this fact does not really help in policy implementation, since banks can also find such funds elsewhere. also called discount rate.

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The bank was able to use the federal reserve discount rate in order to borrow short term funds in order to make a new investment.

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The Federal Reserve Discount Rate was generous at the time, so we took full advantage and managed to increase our leverage more than we originally expected.

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Since they would need funds to cover expansion and additional lending, they would need to borrow extra funds and would be borrowing at the federal reserve discount rate.

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