There's an old Far Side cartoon where someone discovers a guy in a room full of telephones behind a door labeled 'They' and shouts something like "MORTIMER STANLEY! So you're the they in 'That's what they say!'"

In a similar vein, you constantly see news, articles, media, advertisements, and many other sources referring to "interest rates" generically, as in "national interest rates."

I know what an interest rate is. That's not what I'm asking.

I'm asking, when people say that "interest rates have risen" or "interest rates are (low|high) right now", what are they referring to, specifically? Mortgage rates? Bond interest rates? Car loan rates? The many other types of rates there are?

Surely all these things don't move together as one. How does it make sense to lump them all together into the general phrase "interest rates"?

  • 2
    As far as I know, this usually refers to the interest rates offered by the relevant central bank.
    – tomasz
    Apr 18, 2015 at 0:29
  • 1
    I suspect it varies on the source: the WSJ is referring to the fed rate, while your neighbor might be specifically thinking of mortgage rates, since that's the main thing that affects people's lives (Credit card rates, while varying on the prime rate theoretically, have supply/demand and other issues that cause them to not necessarily track all that much.)
    – Joe
    Apr 18, 2015 at 1:12

5 Answers 5


In the United States, if someone refers to the "interest rate", especially if heard on news or talk radio in particular, they are almost always referring to the federal funds rate, a rate set forth and maintained by the United States Federal Reserve (the "fed" for short). If the fed opts to raise or lower this rate, it subsequently effects all interest rates, whether by being directly connected in a chain of loans or by market demand through the efficiency of financial markets in the case of bond auctions. The FOMC meets eight times each year to determine the target for the federal funds rate.

The federal funds rate effects all interest rates because it is the originating rate of interest on all loans in the chain of loans. Because of this significance as a benchmark for all interest rates, it is the rate most commonly referred to as "interest rate" when used alone. That is why other rates are specified by what they actually are; e.g., mortgage rates; 10 year & 30 year (for 10 year treasury and 30 year treasury bond yields respectively); savings rate, auto rate, credit card rate, CD rate—all rates of interest effected by the originating loan that is the federal funds rate.

This is true in the United States but will vary for other countries. In general though, it will almost always refer to the originating rate for all loans in a given country, institution, etc.

Note that bonds have yields that are based on market demand that is, in turn, based on the federal funds rate. It is because of the efficiency of financial markets that the demand, and thus the yields, are correlated to the federal funds rate.


The generic representative of interest rates is the 10 year treasury bond rate. (USA). As an approximation most other interest rates do tend to move up and down with the treasury rate, but with more or less sensitivity.

Another prominently discussed interest rate is the short term loan rate established by the Federal Reserve for loans it makes to banks.

  • Can you provide a source? The other answerer says it's the 30 day treasury rate. Or am I misunderstanding, and that's the same thing? Apr 18, 2015 at 1:55
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    The federal funds rate is the one referred to when one says "interest rate". The 10 year treasury bond rate is just called the "10 year" (30 year, etc.). I'll hear "bond yields" or just the "yields" refer to the 10 year or 30 year rates before I would "interest rate" referring to them.
    – PJS1987
    Apr 19, 2015 at 2:35

Generically, interest rates being charged are driven in large part by the central bank's rate and competition tends to keep similar loans priced fairly close to each other. Interest rates being paid are driven by what's needed to get folks to lend you their money (deposit in bank, purchase bonds) so it's again related. There certainly isn't very direct coupling, but in general interest rates of all sorts do tend to swing (very) roughly in the same direction at (very) roughly the same time... so the concept that interest rates of all types are rising or falling at any given moment is a simplification but not wholly unreasonable.

If you want to know which interest rates a particular person is citing to back up their claim you really need to ask them.


When "people say", each person is referring to whatever he/she is looking at. Interest rates tend to move roughly the same, but often there is a bias regarding long vs. short term. In the US right now, short term interest rates are very low but there is a lot of chatter saying they will rise in the future. The differential between long term rates and short term rates is high compared to historical norms, suggesting that the market believes this chatter. You can also look at the differences in rates between different quality levels. If the economy is improving, the difference in rate for lower rated debt vs. higher rated debt decreases as people think the chance of businesses failing is decreasing. Right now, any interest rate you look at is well below long term historical averages, so asserting that interest rates are low is quite safe.


It refers to the risk free rate of a particular country. Because all other rates are usually pegged to the risk free rate.

In US,it is the 30 day treasury rate. In England, it is the LIBOR In Canada, it is the overnight rate at which banks lend money to each other.

All of these come under the category of risk free rate.

  • Can you provide a source? The other answerer says it's the 10 year treasury rate. Or am I misunderstanding, and that's the same thing? Apr 18, 2015 at 1:55

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