The Wall Street Journal Prime Rate, or the prime rate, is a benchmark interest rate commonly used by banks to set the interest rates for various consumer and commercial loans. This is set by the Federal Open Market Committee (FOMC), a branch of the Federal Reserve System. They set the target range for the federal funds rate during its regular meetings. The prime rate is often directly impacted by the federal funds rate and the discount rate set by the Federal Reserve. The federal funds rate is the rate that banks charge to lend each other overnight loans, while the discount rate is the interest rate at which banks can borrow directly from the federal reserve.

This brightened outlook can have a fairly immediate effect on the stock market as investors start anticipating bullish momentum. As interest rates drop, consumers have more money to spend, and companies begin seeing improved sales margins. This eventually leads to higher stock prices for leading companies, and many investors want to position themselves to get in on the action as early as possible. If you’re unable to keep up with rising rates, you might even consider refinancing with a debt consolidation loan or looking for a lower-interest balance transfer. For example, if you have a 30-year mortgage, it might not move much when the prime rate decreases.

The 10 Most Recent Prime Rate Changes

The prime rate is one of the main factors banks use to determine interest rates on loans. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited docker vs kubernetes vs openshift by law for our mortgage, home equity and other home lending products.

How to create good debt (and steer clear of bad debt)

Liquidity has a way of drying up when interest rates go up as the economy begins to slow down. Depending on your investing style, it may make for a good time to “buy the dip” if you can get a good deal on the stock of a well-established company whose shares are experiencing a price slide. Just be prepared to ride out the economic rut, as shares may dip or move sideways until things begin to even out. While the Wall Street Journal prime rate may initially sound like a really great subscription deal, it’s actually something else entirely.

Small Business Loans

• You’ll also get the best rates by comparing offers from multiple lenders, maintaining a good credit score, and managing your debt.
• The WSJ Prime Rate is essentially the base interest rate that banks are charging borrowers, and it’s referenced by lenders and borrowers alike.
• Banks usually only charge the prime rate to large, corporate customers with lots of financial resources.
• We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site.
• But the prime rate is only one factor among several that determine how much you’ll pay for loans.

You’ll also get the best rates by comparing offers from multiple lenders, maintaining a good credit score, and managing your debt. It alters when three-quarters of these financial institutions adjust their rates. Of course, various other factors also impact your interest rate, such as your credit score, risk trading systems and methods by perry j. kaufman profile, type of loan, location, and the length of time it will take you to repay. The WSJP is approximately 300 basis points (3%) above the federal funds rate, reflecting the Federal Reserve’s monetary policy influences. It is often utilized by commercial real estate lenders as an index upon which loans are price, e.g., WSJP + 1.5%.

Lending Products That Utilize the Prime Rate

• On the other end of the spectrum, a bank’s very best borrowers may be able to negotiate lower than the prime interest rate.
• In a variable rate credit product, the margin remains the same over the life of the loan; however, the variable rate is adjusted when there is a change in the underlying indexed rate.
• While the Wall Street Journal prime rate may initially sound like a really great subscription deal, it’s actually something else entirely.
• However, some market sectors, like the financial industry, often benefit from high interest rates.
• Please review its website terms, privacy and security policies to see how they apply to you.

When you see a reference to “the prime rate,” it usually reflects an average rate across financial institutions. “The prime rate is used to set the rates for loans and credit card balances, plus a risk factor increase,” Niedermeyer says. “Credit cards would be the prime rate plus 10% to 15% as they are considered risky for some borrowers.” Here’s how the current prime rate impacts personal loans, mortgage loans, and everyday debt. “Decisions by a bank’s asset and liability committee will ultimately determine where those other rates will settle,” says Garretty. For example, if one bank wants more credit card business on their books while another does not, they will powertrend quote different credit card rates, even though they are working off the same prime rate.

A rising prime rate indicates that it’s getting more expensive to borrow money and that interest spikes will likely follow as a result. This is not generally the best time to consider taking out a new loan or making a huge purchase, as you’re likely to end up getting stuck paying more interest. But the prime rate is only one factor among several that determine how much you’ll pay for loans. Banks also take into account your creditworthiness—the more likely you are to pay them back, the lower the rate they would charge and vice versa.

What is the Prime Rate?

However, most lenders will offer interest rates at the prime rate + a surcharge for individual customers who do not have the same resources as large corporations. Indexed rate products often use the prime rate as the base rate of interest with a margin or spread determined by the borrower’s credit profile. The prime rate is commonly utilized in variable rate products as an indexed rate, since it is widely recognized and followed across the industry.

These banks provide their individual prime rate, and the Wall Street Journal calculates the average to derive the official Wall Street Journal Prime Rate. The Wall Street Prime Rate (WSJP) is crucial to this transaction because it serves as the “index” upon which the loan’s interest rate is built. If the Federal Reserve raises interest rates, there is typically a corresponding increase in the WSJP. For example, if the Federal Reserve raises its federal funds rate by 50 basis points (0.50%), banks may increase the WSJP by the same amount. Askmoney.com is not an intermediary, broker/dealer, investment advisor, or exchange and does not provide investment advice or investment advisory services.

Data source: Wall Street Journal (print edition)

As money begins to loosen up, you’ll also see the effects of increased liquidity across the economy and markets. Due to the fact that money is now cheaper to borrow, many businesses will even take the opportunity to look into expansion. The Federal Open Market Committee recalculates this rate eight times yearly (roughly every six weeks) based on market conditions. Here’s the prime rate today in 2025 and the Federal Reserve’s influence on today’s prime rate. From 1970 to 1990, it varied between 10% and 21.5%, marking the era with the highest interest rates ever recorded.

The WSJ Prime Rate is affected by the federal funds rate and is an indicator of the overall cost of money for banks and lenders, and of the overall functioning of financial markets. When the prime rate changes, it affects individuals’ and businesses’ savings rates and ability to borrow. The best ways to prepare for changing prime rates are by staying informed on the state of the economy and updates from the Federal Reserve. The prime rate can indirectly impact the performance of your investments, with higher interest rates usually hurting the market.

The U.S. economy is made up of billions of little everyday moments of consumers making decisions and responding to incentives, all trying to maximize their wealth and happiness. Understanding the basics of how interest rates work can help you make better decisions in your financial life. That’s because the WSJ Prime Rate is a key indicator of the cost of consumer borrowing.

Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.