Interest rate charged by a central bank for loans of reserve funds to commercial banks and other financial intermediaries. The discount rate is one important indicator of the condition of monetary policy in an economy. Because raising or lowering the discount rate alters the rates that commercial banks charge on loans, adjustment of the discount rate is used as a tool to combat recession and inflation.
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Types of bank interest rates
used to have a close relation with consumers Bank Rate[current rate of interest]. With an increase in Bankers Bank Rate the Consumers Bank Rate also used to increase. With vast changes in Bank Financial Structure and with less dependency on Central Bank for financing customers credit, the control on Bankers Bank Rate has very less impact on Consumers Bank Rate.
The best way to compare various rates of interest offered
In the UK bank rates are set by the Bank of England's Monetary Policy Committee. The key interest rate is called the official bank rate which is the lowest rate at which the Bank acts as lender of last resort to the money markets.