What is the Prime Rate?
The prime rate is defined by The Wall Street Journal (WSJ) as "The base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks." It is not the 'best' rate offered by banks.
HSH uses the print edition of the WSJ as the official source of the prime rate. Many (if not most) lenders specify this as their source of this index.
Any bank can declare its own prime rate. Some smaller banks will use a larger bank's prime as a reference for pricing loans, but most use the Wall Street Journal version.
When does the prime rate change?
The prime rate does not change at regular intervals. It changes only when the nation's "largest banks" decide on the need to raise, or lower, their "base rate." The prime rate may not change for years, but it has also changed several times in a single year.
Changes in the prime rate are highly correlated with changes in the federal funds rate. The prime rate typically changes a day or so after a change in the federal funds rate.
What is the current prime rate?
The current prime rate is 8.50%. It last changed on July 27, 2023.
Data source: Wall Street Journal (print edition)
Current and Historical Data
| Date of Change | Prime Rate | 04-Mar-20 | 4.25% |
|---|---|
| 16-Mar-20 | 3.25% |
| 17-Mar-22 | 3.50% |
| 05-May-22 | 4.00% |
| 16-Jun-22 | 4.75% |
| 28-Jul-22 | 5.50% |
| 22-Sep-22 | 6.25% |
| 03-Nov-22 | 7.00% |
| 15-Dec-22 | 7.50% |
| 02-Feb-23 | 7.75% |
| 23-Mar-23 | 8.00% |
| 04-May-23 | 8.25% |
| 27-Jul-23 | 8.50% |
What was the highest prime rate?
The highest prime rate was 21.5%, reached on December 19, 1980.
What was the lowest prime rate?
The lowest prime rate since 1975 is 3.25%. This occurred on two occasions: December 16, 2008 and March 16, 2020.
Go to the full list of ARM Index Histories.
HSH Associates makes every reasonable effort to supply complete and accurate information, but assumes no liability for errors.
The prime rate, often considered the benchmark for lending rates in the US, is a fundamental concept in finance. I've been engrossed in financial markets for years, tracking economic indicators and analyzing trends that influence rates like the prime rate.
The prime rate, as per The Wall Street Journal, is essentially the base rate on corporate loans posted by a significant majority of the largest banks in the US. It's crucial to note that this rate isn't necessarily the lowest offered by banks, but rather a standard reference point used by many lenders. This rate isn't set on a regular schedule; instead, it fluctuates when these major banks collectively decide to raise or lower their base rates. Typically, changes in the federal funds rate, set by the Federal Reserve, have a significant impact on adjustments to the prime rate, often occurring within a day or so after such changes.
Let's dive into the provided information:
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Prime Rate Histories:
- 2010-2019: Ranges from 3.25% to 4.75%.
- 2000-2009: Historically higher, fluctuating between 4.25% to 9.50%.
- 1990-1999: Varied between 6.00% to 9.50%.
- 1980-1989: Showed significant volatility, hitting a peak of 21.5% in December 1980.
- 1975-1979: Ranged between 4.75% to 12.25%.
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Highest Prime Rate:
- The highest prime rate recorded was an astonishing 21.5%, occurring on December 19, 1980, during a period of severe inflation and economic turbulence.
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Lowest Prime Rate:
- The lowest prime rate, since the mid-1970s, was 3.25%, observed on two occasions: December 16, 2008, during the financial crisis, and March 16, 2020, likely in response to economic turmoil due to the COVID-19 pandemic.
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Current Prime Rate:
- As of the last provided update in July 2023, the current prime rate stands at 8.50%. However, I can't confirm if this remains the latest figure beyond that date.
Understanding these prime rate histories offers insights into the economic conditions and policies that influenced lending and borrowing costs over the years. It's essential to consider historical trends when analyzing current rates and predicting potential future changes.
