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One hundredth of a percent (0.01%). A common way to describe interest-rate changes.
Why It Matters
Basis points let people talk about rate changes precisely. Saying a rate rose "25 basis points" is clearer than "0.25 percentage points," and avoids confusion between a percentage-point change and a percent change. You'll see "bps" throughout coverage of the Fed, bonds, and loans.
Key Points
- 1 basis point = 0.01%; 100 basis points = 1.00%
- Often abbreviated "bps" and spoken as "bips"
- A typical Fed move is 25 or 50 basis points
Learn More
How the Fed Sets Interest Rates
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
One hundredth of a percent (0.01%). A common way to describe interest-rate changes. Basis points let people talk about rate changes precisely. Saying a rate rose "25 basis points" is clearer than "0.
Basis points let people talk about rate changes precisely. Saying a rate rose "25 basis points" is clearer than "0.25 percentage points," and avoids confusion between a percentage-point change and a percent change. You'll see "bps" throughout coverage of the Fed, bonds, and loans.
1 basis point = 0.01%; 100 basis points = 1.00%
Often abbreviated "bps" and spoken as "bips"
A typical Fed move is 25 or 50 basis points