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Economics vocabulary · Central Banks and Interest Rates

Policy rate

Meaning in economics, with examples

nounCore term

In economics, policy rate means: The main interest rate set by a central bank, which guides the rates that banks charge each other, businesses and households.

In Turkish: politika faizi

How it is used

Also called the benchmark rate, key rate or base rate. Each central bank has its own: the Fed sets a target range for the federal funds rate, the Bank of England sets Bank Rate, and the CBRT's policy rate is the one-week repo rate.

Example sentences

  1. The central bank left its policy rate at 4.25%, as most economists had expected.

  2. Bank lending rates usually follow the policy rate within a few weeks.

Common collocations

  • raise the policy rate
  • keep the policy rate unchanged
  • benchmark rate
  • key policy rate
  • interest rateThe price of borrowing money, shown as a yearly percentage of the amount borrowed; for savers, it is the return they earn on deposits.
  • central bankThe national institution that issues a country's currency, sets the main interest rate and works to keep prices and the financial system stable.
  • rate hikeAn increase in the central bank's main interest rate, usually made to cool demand and bring inflation down.
  • rate cutA reduction in the central bank's main interest rate, usually made to make borrowing cheaper and to support growth and jobs.
  • basis pointOne hundredth of a percentage point (0.01%), used to describe small changes in interest rates and bond yields precisely.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Central Banks and Interest Rates

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