Glossary
Interest Rate
Macro
An interest rate is the cost of borrowing money, with the central-bank policy rate anchoring the rest of an economy's rates.
Policy rates set by the Federal Reserve, ECB, Bank of England and peers feed into bond yields, mortgage rates and, critically for FX, the rate differential between two currencies. Capital tends to flow toward the higher-yielding currency, all else equal.
Markets trade expectations rather than the current level: a rate held steady alongside hawkish guidance can move prices more than a cut that was already fully priced.