FXCM Insights

Interest Rates

What Is An Interest Rate?

An interest rate is the percentage of the principal loan that borrows pay to lenders for borrowing assets.

An interest rate is basically the cost for leasing cash, goods or assets like automobiles. Depending on the risk associated with the borrower, the interest rate could be low or high. Interest rates are often use to control economic activities, such as inflation and unemployment. Central banks lower the interest rate level when investment and consumption is desired, and raise to avoid economic bubbles. In the forex market, some traders use a strategy that involves selling currencies with low interest rates and buy currencies with high interest rates.

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