Interest rate

The interest rate is the amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal. They are typically noted on an annual basis, known as the annual percentage rate (APR). In the case of a large asset, such as a vehicle or building, the interest rate is sometimes known as the "lease rate".

Some of the most common interest-rate benchmarks are:

• LIBOR (the London Interbank Offered Rate)
• U.S. Treasury T-bills, T-Notes and bonds

Many derivatives products are used to trade or hedge exposure to official interest rates across global exchange and OTC markets. (See interest rate futures)

Bank it

Each country's central bank responds to different pressures when setting its interest rate, which markets must factor in when projecting future directions. Most influential is the Fed's Federal Open Market Committee (FOMC), which sets interest rates by buying or selling government securities on the open market. The European Central Bank (ECB), the world's second-most powerful central bank, was established in 1999 at the inception of the euro. Other central banks considered influential include those of England, Japan, Swtizerland, Canada, Australia and New Zealand.