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Finance Dictionary and Glossary of Investment Terms
The interest rate at which banks lend to their best (prime) customers. More often than not, a bank's most creditworthy customers borrow at rates below the prime rate.
The interest rate that commercial banks charge their most creditworthy borrowers, such as large corporations. The prime rate is a lagging indicator. also called prime.
Officially, this is the interest rate that banks charge their biggest and best customers for short-term loans. (In reality, some borrowers are charged less or more, depending on various factors.) Because some other rates in the economy are based on the prime, and because it is considered a good indicator of the direction of rates generally, the prime rate (which is set by individual banks) is closely watched. Banks do not seem to change this rate lightly, and the way is often led by a regional bank rather than one of the big coastal money center institutions.
The interest rate that commercial banks charge their prime or most credit worthy customers, generally the large corporations.