This page reflects the Central Bank discount rates in America, Europe, and the Asian Continent. In short it offers the investor crucial information country wise on the borrowing, lending interest rates of the country's banks as sanctioned by the Central Bank.
Besides this the page is also carrying the Calendar date for the next Central Bank meeting.
What is the role of the Central Bank in a country's Monetary Policy?
'The Lender of Last Resort' is what the Central Bank is understood to be. In other words, it is a bank that provides a country's economy with funds when its commercial banks give up. Thereby, it ensures that a nation's banking system is functional all times of year and never fails.
The primary objective of the Central Bank is to provide price stability to a country's currency and also control inflation. Another prominent role played by it is that of being a regulatory authority of a country's monetary policy. The Central Bank is also the only provider and printer of notes and coins in circulation. In order to function smoothly in the stated capacities, the Central Bank should be kept independent of government fiscal policy and political interests of ruling political regimes. The bank besides functioning in a non partisan manner should also be kept away from commercial banking interests.
The Central Bank's most influential 'economic tool' is its control & ability to increase or decrease discount rate. Shift in this crucial interest rate has a drastic effect on the building blocks of macroeconomics, such as consumer spending and borrowing.
What Is the Discount Rate?
The discount rate is the interest rate fixed on short ¬term loans acquired from regional central banks by banks and depository institutions. Loans received through Central banks is most commonly used to meet up with short ¬term liquidity needs for the borrowing financial institution; in most cases, loans are extended only for an overnight term. The discount rate can be understood as the cost of borrowing from the Central Banks.
Decreasing Discount Rate
When Central Banks changes discount rate, economic activity either increases or decreases, depending on the intended outcome of the change. When the nation's economy is stagnant or slow, the Central bank may enact its power to reduce the discount rate in an effort to make borrowing more affordable for member banks.
Increasing Discount Rates
When the economy is growing at a rate leading to hyperinflation, the Central Bank may increase the discount rate. This results in incapacitating member banks from borrowing from the Central Bank at cost effective interest rate; further tightening lending to the consumer public, until interest rate is reduced again.