Prime Rate

The prime rate is the interest rate that banks charge their most creditworthy customers, usually large corporations, for short-term loans. It serves as a benchmark for many other interest rates, including those for personal loans, mortgages, and credit cards. When the prime rate changes, it often influences the cost of borrowing for consumers and businesses. Banks base their prime rate on the federal funds rate set by the Federal Reserve, adjusting it as economic conditions evolve. Essentially, the prime rate reflects the overall monetary climate and helps determine borrowing costs across the economy.