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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The cost of borrowing money. Higher rates usually mean lower stock prices.
Why It Matters
Interest rates are the price of money - and they affect everything. When the Fed raises rates, mortgages cost more, corporate borrowing costs rise, and safer investments (bonds, savings) become more attractive than stocks. The 2022 stock crash was largely driven by rates rising from 0% to 5%. When rates drop, stocks often soar.
Key Points
- The Federal Funds Rate is the rate banks charge each other - it influences all other rates
- Growth stocks suffer most from rising rates (their future earnings are worth less today)
- Rate decisions happen 8 times a year - Fed meetings are among the most market-moving events
Related Terms
Common Questions
The cost of borrowing money. Higher rates usually mean lower stock prices. Interest rates are the price of money - and they affect everything. When the Fed raises rates, mortgages cost more, corporate borrowing costs rise, and safer investments (bonds, savings) become more attractive than stocks.
Interest rates are the price of money - and they affect everything. When the Fed raises rates, mortgages cost more, corporate borrowing costs rise, and safer investments (bonds, savings) become more attractive than stocks. The 2022 stock crash was largely driven by rates rising from 0% to 5%. When rates drop, stocks often soar.
The Federal Funds Rate is the rate banks charge each other - it influences all other rates
Growth stocks suffer most from rising rates (their future earnings are worth less today)
Rate decisions happen 8 times a year - Fed meetings are among the most market-moving events