real estate

Discount rate

The annual percentage rate of interest (APY) that is charged on loans made by commercial banks to their respective federal reserve banks. As a consequence of this, the rate of interest that the banking system bears inside its own framework is referred to as the discount rate. It is possible for member banks to sell certain promissory notes that they have received from clients to their local branch of the Federal Reserve System for a price that is lower than the notes' face value. The banks will be able to provide further credit after they have received the money. If the discount rate shifts, financial institutions like banks and other lenders may be forced to reevaluate their loan policies and conditions.