Interest Rate
The cost of borrowing money, set or influenced by central banks — the single most powerful lever in macroeconomics.
Interest rates represent the cost of borrowing (or the reward for saving). Central banks set a benchmark policy rate that ripples through every corner of the economy: mortgages, corporate bonds, consumer credit, and currency valuations all move in relation to it.
Higher rates slow growth and inflation by making credit more expensive; lower rates stimulate spending and investment. For traders, every asset class — equities, bonds, forex, crypto — is priced relative to the prevailing rate environment. Rate decisions are the most market-moving events on the calendar.
On the desk
When the Fed raised rates from near-zero to 5.25–5.50% between 2022 and 2023, two-year Treasury yields surged and the U.S. dollar strengthened sharply against every major currency, while emerging-market equities sold off as capital flowed back to dollar-denominated assets.