Definition
Administered Rate is an interest rate that is set directly by an institution—such as a central bank, commercial bank, or financial authority—rather than fluctuating freely based on market supply and demand.
Why It Matters
Administered rates play a central role in monetary policy and financial system stability. When central banks adjust administered rates, they influence borrowing costs, savings returns, credit availability, and overall economic activity. Banks also use administered rates when setting standardized lending or deposit rates for customers.
Example
If a central bank raises its policy lending rate from 4% to 5%, commercial banks may increase their own loan and savings rates accordingly. Because the original rate was set by policy decision rather than market trading, it is considered an administered rate.