Discount policy
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Discount policy is tool taken by the central bank to control the money circulation by raising or lowering interest rates.[1] If the Central Bank raised bank rates, the aim is to reduce money supply in the economy.[1] With the high rates, people are expected to not take out loans and save their money in bank.[1] Therefore, the amount of money will be reduced.[1] Policy to raise bank rates is used to press inflation.[2] Meanwhile, if the central bank lowers bank rates, it aims to increase the amount of money supply.[1] With the low rates, people are not expected to save their money in bank.[1] Thus, the amount of money circulating in the society will increase.[1] The decline in bank rates made by the Central Bank if the economy goes into a recession or if the economy is run into deflation.[1]
The United States discount rate policy
Usage of the discount rate during The Great Recession
According to UC Berkeley researchers, commercial institutions started to give loan to
See also
References
- ^ ISBN 9797584194.
- ^ "Transmisi Kebijakan Moneter". Archived from the original on 6 June 2014. Retrieved 23 May 2014.
- ^ Wellings, George M. "Federal Reserve Act (1913) < A Brief History of Central Banking in the United States - Edward Flaherty < General < Essays < American History From Revolution To Reconstruction and beyond". www.let.rug.nl. Retrieved 2019-03-05.
- ^ U.S, Government (June 22, 2015). "The Federal Reserve Discount Window". Federal Reserve Discount Window.
- ^ "Federal Reserve Board - Discount Rate". Board of Governors of the Federal Reserve System. February 26, 2019. Retrieved 2019-03-05.
- ^ Coghlan, Erin (September 19, 2018). "What Really Caused the Great Recession?". Retrieved 2019-03-05.
- ^ "What Are the Forces Behind Interest Rates and What Causes Them to Rise?". Investopedia. Retrieved 2022-12-28.
- ^ "Fed Lowers Discount Rate to Calm Markets". NPR.org. August 17, 2007. Retrieved 2019-03-05.
- ^ Andrews, Edmund L. (2008-12-16). "Fed Cuts Key Rate to a Record Low". The New York Times. Retrieved 2019-03-05.