Federal discount rate impacts
1 answersQuestion asked ( August 19, 2009 , Shopping / Finance )
I read in the news papers that the federal discount rate has been reduced to ease the money supply in the economy. I’m unsure how the federal discount rate impacts a common man. Does anyone know it at all?
Answers to : discount...
Answer
Federal rate is the rate at which the central / federal bank lends to other commercial banks and is used as an effective tool to control money supply in the market. Federal discount rate is the discounted federal rate which is offered by federal bank to commercial banks to enable banks borrow more from federal banks and lend more to borrowers thereby increasing money supply in the market. The federal rate / federal discount rate play an indirect but vital role impacting end consumers by determining the money supply in the market and the interest rates.
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