interest rate
C1Formal to neutral, widely used in news, finance, and everyday conversation about money.
Definition
Meaning
The percentage of an amount of money that is charged for borrowing it or paid to savers.
A key financial indicator set by central banks or determined by market forces, influencing economic activity, investment decisions, and monetary policy.
Linguistics
Semantic Notes
Typically refers to an annualised percentage (e.g., APR). The term is often used in plural ('interest rates') when discussing the general level or policy changes.
Dialectal Variation
British vs American Usage
Differences
No significant lexical differences. The term 'base rate' is common in UK finance, referring specifically to the Bank of England's rate, analogous to the US 'federal funds rate'.
Connotations
Identical financial connotations. The UK may more frequently reference 'Bank Rate' in news.
Frequency
Equally high frequency in both dialects.
Vocabulary
Collocations
Grammar
Valency Patterns
The [central bank] [set/raised/cut] the interest rate.The interest rate [on the loan] is [5%].[Mortgages] come with a [variable] interest rate.Vocabulary
Synonyms
Strong
Neutral
Weak
Vocabulary
Antonyms
Phrases
Idioms & Phrases
- “Money is cheap (when rates are low)”
- “The cost of money”
Usage
Context Usage
Business
The Board is concerned about how rising interest rates will affect our debt servicing costs.
Academic
The Taylor Rule prescribes how a central bank should adjust its nominal interest rate in response to inflation and output gaps.
Everyday
I'm waiting for interest rates to come down before I remortgage.
Technical
The overnight indexed swap rate implies market expectations for the future path of the policy interest rate.
Examples
By Part of Speech
verb
British English
- The Monetary Policy Committee will likely interest-rate-hike next month.
- The bank interest-rated the loan at 4.5%.
American English
- The Fed is expected to interest-rate-adjust in response to inflation.
- They interest-rated the new bond issue competitively.
adverb
British English
- The loan was priced interest-rate-consciously.
- They invested interest-rate-astutely.
American English
- The market reacted interest-rate-positively to the news.
- She borrows interest-rate-strategically.
adjective
British English
- We're in a high-interest-rate environment.
- The low-interest-rate policy has stimulated growth.
American English
- The interest-rate decision is due Wednesday.
- He's looking for an interest-rate-sensitive stock.
Examples
By CEFR Level
- My bank gives me a low interest rate on my savings.
- What is the interest rate for this loan?
- If interest rates go up, our mortgage payments will increase.
- Central banks use interest rates to control inflation.
- The sudden hike in interest rates has cooled the overheated housing market.
- Investors are fleeing bonds due to expectations of rising interest rates.
- The real interest rate, adjusted for inflation, has turned negative, encouraging capital expenditure.
- Forward guidance is used to shape market expectations about the future trajectory of policy interest rates.
Learning
Memory Aids
Mnemonic
INTEREST RATE: INTER-est you pay for your RATE of borrowing.
Conceptual Metaphor
MONEY IS A COMMODITY FOR RENT (You rent money, and the interest rate is the rent price).
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Do not translate as 'ставка процента' which is calqued and unnatural; use 'процентная ставка'.
- Avoid confusing 'interest rate' (процентная ставка) with 'exchange rate' (обменный курс).
Common Mistakes
- Using singular 'an interest rate' when referring to general economic policy ('Interest rates are rising' is correct).
- Confusing 'interest' (проценты) with 'interest rate' (ставка).
Practice
Quiz
What does a 'floating' or 'variable' interest rate mean?
FAQ
Frequently Asked Questions
'Interest' is the actual money paid or earned (e.g., "I paid £500 in interest"). 'Interest rate' is the percentage used to calculate that amount (e.g., "My interest rate is 5%").
APR (Annual Percentage Rate) is a standardized interest rate that includes the basic rate plus most of the other fees and costs of the loan, providing a more complete picture of the borrowing cost.
Central banks (like the Bank of England or the US Federal Reserve) set the key policy interest rates. Commercial banks then set their own rates for loans and savings, which are influenced by the central bank's rate.
Borrowing becomes more expensive, which can slow down spending and investment, helping to control inflation. Savers may earn more on deposits. Existing loans with variable rates become costlier.
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