The Prime Rate is the interest rate that commercial banks charge their most creditworthy customers, typically large corporations. It serves as a benchmark for various loans, including personal loans, mortgages, and credit cards. The rate is influenced by the monetary policy set by the Federal Reserve, which adjusts it based on economic conditions. When the Federal Reserve raises or lowers its key interest rates, the Prime Rate usually follows suit. A higher Prime Rate means borrowing costs increase, while a lower rate makes loans cheaper. This rate is important for consumers and businesses as it affects their borrowing expenses and overall economic activity.