Final answer:
When making pricing decisions on interest rates, banks are unlikely to include unrelated economic indicators, such as commodity prices that they don't trade or use, or distant geopolitical events. They instead focus on factors that directly impact their operations and the borrower's ability to repay, such as the level of risk associated with the loan, based on the borrower's financial situation and the economic environment.
Step-by-step explanation:
When banks make decisions on pricing interest rates, there are several factors they evaluate, such as the risk of loan defaults, the cost of funds, and the rate of return required by the bank. However, a factor that is unlikely to be included in the pricing decision on interest rates would be unrelated economic indicators, such as the price of commodities that the bank does not trade or use. These indicators do not directly affect the bank's cost of funds or the likelihood of loan repayment.
For instance, the price of wheat would generally not be a factor in a bank's decision on what interest rate to set for a personal loan or mortgage, unless the bank is heavily invested in agriculture or agribusiness loans. Similarly, issues like geopolitical events in distant regions that don't affect the bank's operations or the solvency of its borrowers would likely be excluded from the pricing calculus of rates.
A key aspect that banks do consider is the level of risk associated with the loan, based on factors like the borrower's credit history and income level, as well as the overall economic conditions that might affect a borrower's ability to repay.