The prime rate is a lending rate that banks use as a base rate for consumer lending solutions. Credit card and home equity line of credit rates tend to be tied to the prime rate. Most banks use the federal prime rate, which is printed in the”Wall Street Journal.” Since 1994, the prime rate calculation was based on changes in the fed funds rate determined by the Federal Open Market Committee of the Federal Reserve Bank.

Look up the current Federal Funds Target Rate, also known as the fed funds rate. This rate can be found on the Federal Reserve of New York site under Federal Funds data. As of August 2010, the fed funds rate is a target range of 0 to 0.25 percent.

Add 3 percent to the fed funds rate to get the current prime rate. Since 1994, the prime rate was set in the fed funds rate plus 3 percent. With the fed funds rate at 0 to 0.25 percent, as of August 2010, the prime rate is 3.25 percent.

Look up the date of the next meeting of the Federal Open Market Committee. The FOMC meets eight times a year and votes on the level of the fed funds rate. The new rate is announced on the same day of this assembly. The committee management calendar can be found on the Federal Reserve site.

Check the Federal Reserve site for any change in the fed funds rate on the day of the FOMC meeting. If the rate has changed, compute a new prime rate using the fed funds rate plus 3 percent.

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