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A high or low discount rate is good for the stock market

The discount rate is an important tool for central banks to regulate market interest rates, and there are still many in the community who do not know what it represents. Therefore, investors still need to understand the meaning of the discount rate, whether it is high or low, and the impact of the discount rate on the stock market will be analysed and explained in detail in the following sections.

What does the discount rate mean? It is also the interest rate used when the holder requests the bank to cash the outstanding instrument early and the bank deducts the required interest first. Generally speaking, the discount rate is the rate at which the face amount of the instrument is converted to cash in advance to the payee.

So whether the discount rate is high or low needs to be viewed from two perspectives: firstly, for those who want to borrow, the above must be very low; secondly, for commercial banks, the higher the discount rate as opposed to the borrower, the higher the deduction and the higher the bank wants.

Here, we would also like to talk about something very similar to the discount rate – the rediscount rate. The rediscount rate in the market is one of the three major monetary policies. The rediscount rate is essentially the interest rate that commercial banks pay on the discounted bills they hold as collateral when they borrow from the central bank 即時財經.

What does the rediscount rate mean? The above must give you a general idea. It consists mainly of the following characteristics: 1. short-term; 2. standard; 3. demonstration: having; 4. official, etc.

For the impact of the rediscount rate on the stock market, the main manifestation is the increase in the rediscount rate. The main reasons for the general decline in stock prices are as follows: First, by increasing the rediscount rate, the central bank will tighten its monetary base. As a result, commercial banks lending to the central bank will reduce the tightening of funds in the market. The result for the stock market is a drop in demand for equities and a fall in share prices; secondly, the stipulation that the rediscount rate is the benchmark interest rate for the market, i.e. an increase in market interest rates, has the net result of contributing to a fall in share prices.

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