Interest rate

The percentage rate charged when money is borrowed and paid when it is loaned. Interest rates usually increase when inflation rises, demand for credit is high or money supply is tight.  Higher interest rates mean fewer individuals and companies borrow money and more people will save money. This consequently slows the economy and dampens stock market activity as investors can get better returns from other financial products. Interest rates are set and reviewed each month by the Monetary Policy Committee, part of the Bank of England.

This definition is for general information purposes only