A basis point is one hundredth of a percentage point.
If the Bank of England cuts interest rates by 0.25% from 5.75% to 5.5%. This is a cut of 25 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
