What's the Interest Rate referring to?


I am new to forex and also economy aspect as well.

I used to come across the sentence of, … Waiting for the Interest Rate
that will be announce by the Federal Reserve Chairman, Bernanke and etc.

In fact, I wish I can know what is the Interest Rate that is referring by the
chairman? Is it the currency interest rate or bank interest rate and something

Hope can get Help from you guys. Leave me a website for me to read along
if it is too much to be explained or what.

Thank you. :slight_smile:

The intrest rate that they are talking about is the “prime rate.” That is the minimum amount that banks can charge for loans. How it implies to forex you will find that in babypips school of pipology.

Well today’s interest rate decision was worsened by news that a british mortgage bank had suffered massive withdrawals and the two combined to push stocks down. It also didn’t help that oil futures also hit a high.

Actually, that’s totally incorrect on all fronts.

There are two interest rates the Federal Reserve (specifically the FOMC) controls. The most commonly talked about one, and the one that folks mean when they say the Fed cut rates, is the Federal Funds (Fed Funds) target rate. Fed Funds are the deposits banks must keep with the Fed as a portion of the deposits they have (they can then lend the remainder). Banks with excess deposits lend them to those in need on an overnight basis. The Fed Funds Rate is the interest rate charged in those transactions. It’s a floating rate, but the Fed acts in the market to keep the actual rate close to its target.

The other rate the Fed controls is the Discount Rate. This is the interest rate the Fed charges banks to borrow money directly from the Fed.