the discount rate is set higher or at the typical market rates to disincentivize its use
Illya Gerasymchuk
the discount rate is set higher or at the typical market rates to disincentivize its use
it's really meant to serve as an emergency lending source - only when other financing routes are exhausted: regular interbank markets, wholesale markets and SRF among others
Discount Rate is the rate at which the FED lends directly to banks through its discount window
think of it as an emergency lending facility which the banks can use whenever they need funds
since banks can always get a loan at that rate - it caps the short-term interest rates
