Discount rate
MacroDefinition
Interest rate the Federal Reserve charges commercial banks for short-term loans from the discount window. Set above the upper end of the Fed Funds target rate (currently +50 bps), so banks usually only borrow there in stress.
Symbolic role: signaling tool when the Fed wants to demonstrate commitment to either tightening or easing. Discount window borrowing spiked in March 2020 (COVID) and March 2023 (regional bank crisis).
Symbolic role: signaling tool when the Fed wants to demonstrate commitment to either tightening or easing. Discount window borrowing spiked in March 2020 (COVID) and March 2023 (regional bank crisis).