For much of the past 15 years, the prime rate has been muted. It rested at 3.25% from the end of 2008 until 2015 as the Fed set interest rates at near zero following the Great Recession.

The chart below shows each recent move by the Fed, beginning in March 2022 when it started raising the federal funds rate to combat inflation.

You’ll note that the prime rate is about 3% higher than the top figure in the federal funds rate range. That’s because banks set their prime rates by adding a margin to the fed funds rate. The ...