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.
Usually, interest rates are cut in small amounts by 0.25% (25 basis points) or 0.5% (50 basis points)
2009 was unusual in that interest rates were cut from 5% to 0.5% (450 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