Basis Points and Percentages

Readers Question: What does it mean when Bank of England cuts interest rates by 50 base points?
A basis point is one hundredth of a percentage point.

If the Bank of England cuts interest rates by 0.50% from 1.5% to 1.0%. This is a cut of 50 basis points.

Basis points are often used to talk about small movements in exchange rates, interest rates and bond yields

Not to Be confused with

• Base Years.

When talking about an index such as the consumer price index. We start off with a base year, where the index is set to 100. This makes it easy to compare % changes since the initial base year.

See also

• How to calculate a percentage