The discount rate is an economic measure of the pure time value of money. Frequently news media use the term “discount rate” to denote the Federal Reserve Rediscount Rate, the rate the Federal Reserve charges banks to borrow short-term funds. This number has little to do with the true prevailing discount rate, which is set by the expectations of borrowers and lenders about the supply of and demand for money, the prospects for business, expectations of inflation, and a host of other factors.