Buzzword: Discount rate
The lender of last resort brings us this week’s Marketplace Money Buzzword: Discount Rate
The discount rate is what the Fed charges commercial banks for loans. It’s not to be confused with what commercial banks charge each other. That’s the Federal Funds rate.
This week the Fed made noise when they cut the discount rate by a half-point. It showed how bad the credit crunch had become.
See, banks prefer borrowing from other banks, ’cause it’s cheap. But when there’s a money crisis and loans get scarce, sometimes there’s no choice. Go to the central bank or try another option: Sell lemonade?
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
