Interest rates affect everyone from consumers to businesses to entire nations. They are a tool of monetary policy set by central banks and used as a benchmark for business and consumer borrowing.
Frequently Asked Questions
  • How are interest rates calculated?

    To calculate interest rate, multiply the principal amount of money by the time period involved (weeks, months, years, etc.). Then divide the amount of paid interest from that time period by that number.

  • When will the Federal Reserve raise interest rates?

    The Federal Open Market Committee of the U.S. Federal Reserve System meets at least eight times a year. In those meetings, that group directs open market operations, meaning they decide on near-term monetary policy such as tightening or loosening the money supply. That, in turn, raises or lowers interest rates.

  • How do federal interest rates affect the economy?

    High interest rates mean there is a high cost to borrow money for companies and households. Higher borrowing costs lower consumer spending and investment spending by companies. That lowers the overall demand for goods and services and lessens inflation.

  • What is a good interest rate on a loan?

    The answer to that will vary based on the person or company, and that entity's credit score, the type of loan, and the term of the loan. And it will change over time. For a person with excellent credit, you may find a personal loan with an interest rate as low as 10%.

Key Terms

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