Terminal Rate
a.k.a. Peak rate
The level where a central bank's interest rate is expected to top out (or bottom out) in a cycle.
In plain English
The level where a central bank's interest rate is expected to top out (or bottom out) in a cycle.
The terminal rate is the end of the line for a rate cycle. During a hiking cycle, markets constantly guess where the central bank will stop. During a cutting cycle, where it will bottom out.
Currencies often react more to changes in the expected terminal rate than to the next single move. If a strong data release convinces traders the Fed will hike to 5.5% instead of 5%, the dollar can jump even though nothing has happened yet.
Keep this word for good
Your free Private Swap Lounge saves the terms you’ve learned and quizzes you on them. Portal under construction. Expected delivery date is December 01, 2026.