|Oct 20,||Value||Change||Last||52 week|
Prime Rate refers to the interest rate charged by banks on loans lent to their most credit worthy customers. Prime Rate is also known as Prime Lending Rate. There are different indices that report on the prime rate and one of most commonly referred is the Prime Rate index is the Federal Reserve Bank’s Prime Rate (FRB Prime Rate). Federal Reserve Bank (FRB) defines FRB Prime Rate as the "rate posted by a majority of top 25 (by assets in domestic offices) insured U.S. chartered commercial banks." FRB also describes it as "Average majority prime rate charged by banks on short-term loans to business, quoted on an investment basis". It is also known as Bank prime loan.
The FRB Prime Rate is primarily dependent on the Fed Funds rate set by the Federal Open Market Committee (FOMC). The Fed Funds rate affect the cost of borrowing of the banks which is passed on to borrower’s in the form of interest rate on the loans. Usually the FRB Prime Rate is 3% over the Fed Funds Rate.
The FRB Prime Rate does not change frequently. The changes are usually followed by changes in the Fed Funds Rate. The Prime Rate is published in the Selected Interest Rates (Daily) - H.15 publication as the Bank prime loan. FRB publishes business day, daily, weekly, monthly, and annual series for Prime Rate. The weekly figures are averages of 7 calendar days ending on Wednesday of the current week. The monthly figures include each calendar day in the month. The Prime rate is annualized using a 360-day year or bank interest.
The FRB Prime Rate is used as a general indicator of the current market rates. It closely mirrors the WSJ Prime Rate. WSJ Prime Rate is generally used for HELOC’s most widely used index for setting rates on home equity lines of credit (HELOC).
Updated: Oct 20, 2019