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Discount interest rate
The Discount Rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from the U.S. Federal Reserve Bank's lending facility called the discount window. The Federal Reserve regional banks offer three discount window programs to depository institutions: primary credit, secondary credit, and seasonal credit, each with its own interest rate. All discount window loans are fully secured.
Under the primary credit program, loans are extended for a very short term (usually overnight) to depository institutions in generally sound financial condition. Depository institutions that are not eligible for primary credit for secondary credit to meet short-term liquidity needs or to resolve severe financial difficulties.ities.
External links
- FederalReserve.gov - Definition and explanation of discount rates
