Discount rate

Definition 1 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 Federal Reserve Discount Rate. Definition 2 The Interest rate used in discounting future Cash flows; here also called Capitalization rate.