An interest rate is the price a borrower pays for the use of money they do not own, for instance a small company might borrow from a bank to kick start their business, and the return a lender receives for deferring the use of funds, by lending it to the borrower. Interest rates are normally expressed as a percentage rate over the period of one year. Interest rates targets are also a vital tool of monetary policy and are used to control variables like investment, inflation, and unemployment.

Interest rates throughout history have been variously set either by national governments or central banks. For example, the Federal Reserve federal funds rate in the United States has varied between about 0.25% to 19% from 1954 to 2008, while the Bank of England base rate varied between 0.5% and 15% from 1989 to 2009, and Germany experienced rates close to 90% in the 1920s down to about 2% in the 2000s. During an attempt to tackle spiralling hyperinflation in 2007, the Central Bank of Zimbabwe increased interest rates for borrowing to 800%.

Similar to 0 things you like: