Interest rates
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Interest rates are a fundamental tool for central banks to manage inflation and economic growth. Higher rates discourage borrowing and spending, while lower rates encourage them.
Word family
- interest (noun): Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.
Collocations
- raise interest rates
- cut interest rates
- high interest rates
- low interest rates
- fixed interest rates
- variable interest rates
Example sentences
- "The central bank decided to raise interest rates to cool down the overheating economy." Central bank announcement.
- "High interest rates can make mortgages and car loans more expensive for consumers." Personal finance advice.
- "Investors often monitor interest rates as they impact bond yields and stock market performance." Investment strategy.
Memory hook
Think of the 'INTEREST' you pay or earn as the 'RATE' for using or lending money. Cost of money
When not to use
Do not use 'interest rates' when referring to a general 'interest' in something. It specifically refers to the cost of borrowing money or the return on savings.
Fun facts
- Negative interest rates, where lenders pay borrowers, have been implemented by some central banks in recent years, though they are highly unusual.
Explore more words
interest, Monetary Policy, loan, Floating Rate, Reserves, Mortgage
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