What Is An Interest Rate

The Federal Reserve's decision to cut interest rates 25 basis points for the first time in over a decade marked a dramatic shift in monetary policy.

The interest rate is the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.

Definition of interest rate: The annualized cost of credit or debt-capital computed as the percentage ratio of interest to the principal. Each bank can determine its.

A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve Board policies.

Interest, in finance and economics, is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay the lender or some third party.

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However, the Prime Rate is invariably tied to America’s cardinal, benchmark interest rate: the Federal Funds Target Rate (or Fed Funds Target Rate [FFTR].) The FFTR is set by a committee within the Federal Reserve system called The federal open market Committee ( FOMC ).