# Interest Rate Parity

*Macro & Economy — Finicade finance glossary*

Interest rate parity is the no-arbitrage link between two countries' interest rates and their exchange rate: higher rates imply an expected depreciation.

The no-arbitrage link between two countries' interest rates and their exchange rates: the currency with higher rates must be expected to weaken, or traders would pile in risk-free.

**Also known as:** uncovered-interest-parity

**Related terms:** [Exchange Rate](https://finicade.com/glossary/exchange-rate), [Purchasing Power Parity (PPP)](https://finicade.com/glossary/purchasing-power-parity), [Arbitrage](https://finicade.com/glossary/arbitrage)

**Taught in:** Macro & Markets — Openness & Interest Parity

Source: https://finicade.com/glossary/interest-rate-parity