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Finance & Banking vocabulary · Interest & Exchange Rates

Policy rate

Meaning in finance & banking, with examples

nounCommon term

In finance & banking, policy rate means: The main interest rate set by a central bank to steer the cost of money in the economy and bring inflation towards its target.

In Turkish: politika faizi

How it is used

Used in economic news, treasury and pricing. The central bank raises, cuts or holds the policy rate, and banks then adjust their loan and deposit rates. In Türkiye it is the one-week repo auction rate; in the US, the target range for the federal funds rate.

Example sentences

  1. After the policy rate cut, we lowered our consumer loan rates.

  2. Economists expect the policy rate to stay unchanged this month.

Common collocations

  • raise the policy rate
  • cut the policy rate
  • policy rate decision
  • hold the policy rate
  • central bankA country's or region's main monetary authority, which issues money, sets the policy interest rate and works to keep prices and the financial system stable.
  • interest rateThe price of borrowing money, shown as a percentage of the amount borrowed or saved for a period, usually one year.
  • basis pointOne hundredth of one percentage point (0.01%). It is used to describe small changes in interest rates and yields precisely.
  • variable rateAn interest rate that can go up or down during a loan or deposit term, usually because it follows a benchmark rate.

This word in other fields

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

More terms: Interest & Exchange Rates

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This page explains English vocabulary for learners. It is not financial advice.