Interest rate

The price of borrowing money, given as a percentage per year.

A borrower pays interest to a lender for the use of the money. A deposit at 5% a year pays $50 a year on $1,000; a loan at 20% costs $200 a year on $1,000.

Central banks set a key rate that influences the rates banks offer. When interest rates rise, the prices of existing bonds with lower fixed rates usually fall.