Federal Reserve Discount

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The Federal Reserve Discount is the rate at which member banks can borrow money from the Federal Reserve Bank.

 

If the Fed lowers its discount rate, interest rates generally go down
If the Fed raises its discount rate, interest rates generally go up

 

When the Fed lowers the interest rates, member banks can pass on all or part of the savings to consumers.  This generally results in overall lower interest rates.  The opposite is also true.

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