Basis point

Sometimes you will hear financial journalists talk about basis points, and that an interest rate has moved by a certain number of basis points (typically 25, 50 or 75 basis points).

This simply refers to one hundredth of one percentage point, in other words 0.01%

Thus if an interest rate moves from 2% to 2.25% then this is an increase of 25 basis points.

The number is also often used in response to other terms expressed in percentages, such as bond yields, mortgages and so forth.

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