📈 FED & WSJ Prime Rate 🏦
Prime Rate by Country
🇺🇸Country United States |
Latest Rate 8.5 |
Rate a Week Ago 8.25 |
52 Week High 8.5 |
52 Week Low 5.5 |
🇨🇦Country Canada |
Latest Rate 7.2 |
Rate a Week Ago 7.2 |
52 Week High 7.2 |
52 Week Low 4.7 |
🇯🇵Country Japan |
Latest Rate 1.48 |
Rate a Week Ago 1.48 |
52 Week High 1.48 |
52 Week Low 1.48 |
🇪🇺Country Eurozone |
Latest Rate 4.25 |
Rate a Week Ago 4.0 |
52 Week High 4.25 |
52 Week Low 0.5 |
🇨🇭Country Switzerland |
Latest Rate 2.25 |
Rate a Week Ago 2.25 |
52 Week High 2.25 |
52 Week Low 0.25 |
🇬🇧Country UK |
Latest Rate 5.0 |
Rate a Week Ago 5.0 |
52 Week High 5.0 |
52 Week Low 1.25 |
🇦🇺Country Australia |
Latest Rate 4.1 |
Rate a Week Ago 4.1 |
52 Week High 4.1 |
52 Week Low 1.85 |
📈 WSJ Prime Rate
The widely recognized benchmark for setting credit card rates and home equity lines of credit is the prime rate, which is reported by The Wall Street Journal's bank survey. This rate is determined based on the federal funds rate, set by the Federal Reserve. For adjustable-rate mortgages, the COFI (11th District cost of funds index) serves as a commonly used benchmark.
📚 Definition of Prime Rate
The prime rate represents the interest rate at which banks lend money to their most creditworthy customers. Jeanette Garretty, Chief Economist and Managing Director at Robertson Stephens, explains that these customers are considered to have the least risk of default. The prime rate typically reflects the lowest interest rate charged by banks and serves as a benchmark for determining interest rates on other financial products such as credit lines, credit cards, and small business loans.
💼 Changes in the Federal Funds Rate
The Federal Open Market Committee primarily uses the federal funds rate as a tool to influence interest rates and the overall economy. Alterations in the federal funds rate have extensive consequences, affecting borrowing costs for banks in the overnight lending market, as well as the returns on bank deposit products like savings accounts, certificates of deposit, and money market accounts. Changes in the federal funds rate and the discount rate also lead to adjustments in The Wall Street Journal prime rate, which is of great interest to borrowers. The prime rate serves as the underlying index for various financial products, including credit cards, home equity loans and lines of credit, auto loans, personal loans, and numerous small business loans. The 11th District Cost of Funds index is commonly used as an indicator for adjustable-rate mortgages.
📮FAQ
Some Frequently Asked Questions.
Each bank sets its own Prime Rate. For instance, Commerce Bank determines its consumer product rates using the U.S. Prime Rate published in 'The Wall Street Journal' under the column 'Money Rates.' This published rate is based on the Federal Reserve's federal funds rate. It's worth noting that the U.S. Prime Rate may not always be the lowest or the most favorable rate of interest, as different banks employ various methods to determine the applicable rate for each product and when adjustments should be made. For more information, it is recommended to consult with a Commerce Banker.
Typically, banks reserve the prime rate for large corporate customers with substantial financial resources. These customers are perceived as having the necessary funds and assets to repay the loans.
For individual consumers who may not possess the same financial resources, banks usually charge them the prime rate plus an additional surcharge based on the specific product they are seeking. For example, a credit card rate might be the prime rate plus 10%.
On the other hand, the most creditworthy borrowers may be able to negotiate interest rates lower than the prime rate. Such negotiations were more common in the 1980s when interest rates were considerably higher. Lenders would try to attract these 'blue chip' borrowers by offering rates lower than the prime rate.
According to Garretty, there is a general rule that the prime rate equals fed funds plus 3. When the federal funds rate changes, one bank typically takes the lead and announces a change in its prime rate on the same day.
Unlike other rates that fluctuate daily or weekly based on short-term financial market conditions and supply-demand dynamics, the prime rate only moves when the federal funds rate changes. Once a bank adjusts its prime rate in response to the new federal funds rate, it begins to make corresponding adjustments in rates for many other lending products. When the federal funds rate and the prime rate decrease, other rates follow suit, making borrowing less expensive.