Inflation: Inflation refers to the general increase in prices over time. When inflation is high, it can lead to higher interest rates as lenders demand compensation for the decrease in purchasing power.
Federal Reserve: The Federal Reserve, also known as the central bank of the United States, plays a crucial role in setting and influencing interest rates through its monetary policy decisions.
Prime Rate: The prime rate is the lowest interest rate that commercial banks charge their most creditworthy customers. It serves as a benchmark for other lending rates in the economy.