What is U.S. prime rate?

The U.S. prime rate is in principle the interest rate at which a supermajority of large banks loan money to their most creditworthy corporate clients. As such, it serves as the de facto floor for private-sector lending, and is the baseline from which common "consumer" interest rates are set. Traditionally, the rate is set to approximately 300 basis points over the federal funds rate. The Federal Open Market Committee meets eight times per year wherein they set a target for the federal funds rate.

In the United States, the prime rate is traditionally established by the Wall Street Journal. Every major bank sets its own prime rate. When 23 out of the 30 largest US banks change their prime rate, the Journal publishes a new prime rate.