Economy & context
An interest rate is the price of borrowing or reward for lending over time, expressed under a stated convention. Different rates reflect term, currency, credit, liquidity and policy.
Make it click
Borrowing a tool has a rental cost that depends on how long it is used and whether it will be returned safely. Money has similar time and reliability dimensions.
Now put that into markets
Central-bank policy rates influence, but do not equal, mortgage, deposit, bond and company borrowing rates. Markets form curves for different maturities.
Nominal rates include expected inflation and real compensation. Fixed and floating contracts transmit rate changes on different schedules.
Name benchmark, term, compounding, currency and credit quality. Compare annual percentage conventions carefully.
A rate cut can accompany economic weakness and need not lift every asset. Borrowers and savers experience transmission differently.
Takeaway
