Plain-English definitions, reviewed by an independent investor
Interest Rate
An interest rate is the cost of borrowing or the reward for lending, set by markets and central banks.
An interest rate is the cost of borrowing or the reward for lending, set by markets and central banks.
(A percentage cost or yield on money over time)
Why it matters
It is the gravity of all asset prices; up pulls most down, down lifts them.
Common confusion
Rates move for inflation, growth, and policy; the drivers mix constantly.
Frequently Asked Questions
Why do rates affect stocks?
Higher rates make bonds compete and raise company borrowing costs.
Who sets rates?
Central banks set policy rates; markets set the rest from there.