1. Interest on an annual basis deducted in advance on a loan; SYN. discount, bank discount.
2. (us) The rate of interest set by the Federal Reserve that member banks are charged when they borrow money through the Federal Reserve System.
The rate that banks are charged to borrow money from the Federal Reserve Bank. One of the tools of monetary policy, the discount rate allows the Federal Reserve System to govern consumer interest rates and the amount of money in circulation.