Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Interest Rate”. 'INTEREST RATE' is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR). The assets borrowed could include, cash, consumer goods, large assets, such as a vehicle or building. Interest is essentially a rental, or leasing charge to the borrower, for the asset's use. In the case of a large asset, like a vehicle or building, the interest rate is sometimes known as the "lease rate". When the borrower is a low-risk party, they will usually be charged a low interest rate; if the borrower is considered high risk, the interest rate that they are charged will be higher. Interest is charged by lenders as compensation for the loss of the asset's use. In the case of lending money, the lender could have invested the funds instead of lending them out. With lending a large asset, the lender may have been able to generate income from the asset should they have decided to use it themselves. One important influence that drives forex is the interest rate changes from eight of the world's most important central banks. Interest rate shifts represent a monetary, policy-based response as a result of economic indicators that assess the health of an economy. Most importantly, they possess the power to move the market immediately as one aspect of a country's fundamentals have now suddenly changed. Moreover, surprise rate changes may often make the biggest impact because these volatile moves can lead to quicker responses and higher profit levels. By Barry Norman, Investors Trading Academy