Floating Discount Rate
A central bank's DISCOUNT RATE which instead of being fixed at a particular level by the central bank in accordance with its prevailing MONETARY POLICY, as one of the tools of control of such policy, varies pursuant to the changes in a key MONEY MARKET rate, such as that on offerings of Treasury bills. the discount rate of the BANK OF CANADA from 1956 to 1962 floated 0.25% above the Treasury bill rate. An alleged advantage of a floating discount rate of the central bank is the fact that it keeps in line with prevailing money rates, instead of being either above or below the market.
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