The rate charged to business based upon the prime rate is adjusted on the margin to account for differences in credit worthiness of the borrowers.
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The prime interest rate responds to changes in demand for loans and also the amount of money that is present in the entire banking system. Banks will adjust their rates for competitive reasons but primarily because the yare all subject to the same monetary decisions that affect every other bank in the US.
The prime interest rate is influenced by a variety of factors directly such as the discount rate and the federal funds rate and many indirect factors that influence these figures. The Federal Reserve does not directly set the prime rate.
The prime interest rate is a figure that represents the interest rate paid by the excellent credit borrowers (typically well to do businesses). The figure is typically pretty consistent across major banks and the rate is reported at the opening of every month.