WHAT IS IT?
FEDERAL DISCOUNT RATE–
Currently at 3%
WHAT IT MEANS?
The interest rate at which an eligible financial institution may borrow funds directly from a Federal Reserve bank
HOW IS IT USED?
The Fed uses the discount rate to control the supply of available funds, which in turn influences inflation and overall interest rates. The more money available, the more likely inflation will occur. Raising the rate makes it more expensive to borrow from the Fed. That lowers the supply of available money, which increases the short-term interest rates. Lowering the rate has the opposite effect, bringing short-term interest rates down.
