Discount rate 貼現率

Tools to control money supply (1)
控制貨幣供應方案（一）
Discount Rate 貼現率
**Discount rate唔係指購物時享有嘅折扣優惠(not equal to purchasing discount)**
#Definition: The discount rate is the interest rate that the CENTRAL BANK charges when it lends money to (private) banks.

Situation I:
When discount rate increases...
當貼現率增大
a) Cost of borrowing increases
銀行借錢代價增大了
b) Borrowing of cash from banks discouraged
銀行向中央銀行借錢意欲大減
c) Reserves CANNOT be raised to facilitate more lending
儲備不足供應巿民貸款
d) Money supply drops
貨幣供應大減
Paragraph in complete sentences:
When the central bank raises the discount rate, the cost of borrowing from the central bank increase. Banks will borrow less from the central bank. Thus, reserves cannot be raised to facilitate more lending. Money supply drops.

Situation II:
When discount rate decreases...
當貼現率減少
a) Cost of borrowing increases
銀行借錢代價減少了
b) Borrowing of cash from banks discouraged
銀行向中央銀行借錢意欲大增
c) Reserves are ABLE to loan out money to earn profits
儲備足以供應巿民貸款
d) Money supply increases
貨幣供應大增
Paragraph in complete sentences:
When the central bank lowers the discount rate, the cost of borrowing from the central bank drops. Banks will borrow more from the central bank and then loan out the money to earn profits. Money supply increases.

SUMMARY

When the central bank lowers (raises) the discount rate, the money supply increases (decreases).
貼現率升 貨幣供應減