Bank rate, or discount rate, refers to the interest rate charged by a country’s central bank when it lends money to a domestic or commercial bank, often in the form of short-term loans. By managing its bank rate, central banks can affect economic activity. For instance, lowering a bank rate can help to boost an economy by lowering the cost of funds for borrowers, increasing market activity. Conversely, increasing a bank rate can slow down an economy and decrease market activity.
Bank rates can have an impact on the value of currencies. This is because higher interest rates can attract foreign investment and strengthen a currency, while lower interest rates can reduce foreign investment and weaken a currency.
When a central bank raises a bank rate, borrowing becomes more expensive for commercial banks, which lead to higher interest rates. This can in turn lead to a currency’s value appreciating against other currencies. Conversely, when a central bank lowers a bank rate, it can lead to a currency’s value depreciating against other currencies.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.