Group 18

Analysis of the FED’s federal discount rates over the last 10 years


The Fed uses the discount rate to control the supply of available funds, which in turn influences inflation and overall interest rates.

The more money available, the more likely inflation will occur.

That lowers the supply of available money, which increases the short-term interest rates. Lowering the rate has the opposite effect, bringing short-term interest rates down.
The board of directors of each reserve bank sets the discount rate every 14 days.
During the financial crisis that began in the summer of 2007, several adjustments were made to encourage institutions to borrow from the discount window including extending the maximum term on primary credit loans to 30 days in August 2007 and then to 90 days in March 2008. As of March 2010, the maximum term on discount window loans has been reduced back to typically overnight.


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