An interest rate is, at its core, the price of borrowing money. If a bank lends you $100 at a 5% annual interest rate, you owe it $105 by the end of the year. That's the fee you pay for being able to use money now instead of waiting until you've saved it yourself.

Zoom out, and this same idea applies to governments, companies, and entire economies. The "interest rate" everyone in the news is talking about — the one the Federal Reserve sets — is the rate at which banks lend each other money overnight. It sounds narrow, but it acts like a starting point that almost every other interest rate in the economy is built on top of: mortgages, car loans, credit cards, and corporate borrowing all move in the same direction as the Fed's rate, even if the exact numbers differ.

Why does the Fed change it at all?

The Fed raises rates when it wants to cool down an economy that's growing too fast or has inflation running too hot — making borrowing more expensive slows down spending and investment. It lowers rates when it wants to encourage borrowing and spending, usually because growth is weak.

Why does this move stock prices?

Two big reasons. First, higher rates make borrowing more expensive for companies, which can shrink profits. Second, when rates rise, "safe" investments like government bonds pay more too, which makes some investors shift money out of stocks and into bonds instead, since it's no longer as necessary to take on stock market risk to get a decent return.

None of this requires a finance degree to follow — it's really just the price of money, moving up and down like the price of anything else.