An interest rate is the cost of borrowing money, expressed as a percentage of the principal per year. Set by lenders based on borrower risk, market rates (typically pegged to a benchmark like SOFR), and term. The Federal Funds Rate is the foundation — Fed actions cascade through Prime Rate, mortgage rates, savings yields, bond prices. Interest rates affect every borrowing and lending decision: mortgages, credit cards, savings accounts, bonds, business loans. Higher rates cool borrowing, slow economic activity, hurt asset prices, but help savers. Lower rates do the opposite. The interest rate cycle drives much of macro investment performance.
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Interest Rate
August 22, 2026 · Aditya Gupta
Finance
Related terms
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The bond market is the global market for debt securities — US Treasuries, corporate bonds, municipal bonds, mortgage-backed…
Bubble
An asset bubble is a sustained rise in asset prices well above fundamental value, driven by speculation rather…
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