<p>It is exceedingly rare for commentators to discuss the discount rate. As such, referring to “rate cuts” typically refers to Fed Funds.</p>

<p>In any event, under normal circumstances, the discount rate is kept at a constant spread to the Fed Funds rate, so they move at the same time.</p>

CC BY-SA 4.0
2020-05-13T11:33:19.290Z
2020-05-13T11:33:19.290Z
Brian Romanchuk
<p>In <strong><em>practice</em></strong>, the discount rate is an object that derives from other rates (of interest, required, ...), see, e.g. <a href="https://en.wikipedia.org/wiki/Weighted_average_cost_of_capital" rel="nofollow noreferrer">WACC</a> when calculating <a href="https://en.wikipedia.org/wiki/Net_present_value" rel="nofollow noreferrer">NPV</a>s.</p>

<p>The FED always talks about (interest) <a href="https://www.investopedia.com/terms/k/key-rate.asp" rel="nofollow noreferrer">key rates</a>.</p>

CC BY-SA 4.0
2020-05-13T11:26:19.540Z
2020-05-13T12:45:13.847Z
2020-05-13T12:45:13.847Z
keepAlive
<p>When it is said that the Fed cut interest rates, does this refer to the discount rate, fed fund rate or both?</p>

<macroeconomics><interest-rate><federal-reserve>
Regarding the role of the Fed in controlling interest rates
Cheng
# Regarding the role of the Fed in controlling interest rates

(Asked by: username_0 on 2020-05-13)

When it is said that the Fed cut interest rates, does this refer to the discount rate, fed fund rate or both?

**Tags:** macroeconomics, interest-rate, federal-reserve


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## 2 answers

### Answer by username_1 on 2020-05-13. Score: 2

It is exceedingly rare for commentators to discuss the discount rate. As such, referring to “rate cuts” typically refers to Fed Funds.

In any event, under normal circumstances, the discount rate is kept at a constant spread to the Fed Funds rate, so they move at the same time.


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### Answer by username_2 on 2020-05-13. Score: 1

In ***practice***, the discount rate is an object that derives from other rates (of interest, required, ...), see, e.g. [WACC](https://en.wikipedia.org/wiki/Weighted_average_cost_of_capital) when calculating [NPV](https://en.wikipedia.org/wiki/Net_present_value)s.

The FED always talks about (interest) [key rates](https://www.investopedia.com/terms/k/key-rate.asp).


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