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The prime interest rate or prime lending rate (PLR) is the rate at which banks lend funds to the clients they consider most credit worthy and from whom they expect no defaults in repayment. This is not to be confused with the Federal Funds Rate, which is the rate for loans betweens banks. Sometimes this is also called the Prime Rate.
This has been kept at a very low rate of 3.25% to facilitate the economic development and encourage the creation and expansion of new industry in the US. Unemployment in the US is still quite high and though it is trying to find its way out from the economic turmoil that has affected it in the past 2 years it has still a long way to go.
Increasing the PLR can disrupt this recovery, though the extremely low rate at which it is right now is also not very good for the economy in the long run .
I think that within the next 3 years the economy will recover sufficiently to allow the PLR to be brought back to its earlier levels of 5% that it was before the economic meltdown. It will remain constant once that is done.
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