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One one-hundredth of a percentage point (0.01%). Interest rates and yields are quoted in basis points to avoid confusion — a "25 basis point" rate hike means 0.25%.
Why It Matters
The Fed moves rates in basis-point increments (usually 25 at a time), and bond yields are discussed the same way. When a headline says "the 2-year yield jumped 16 basis points," that's a 0.16% move — small-sounding, but enough to swing mortgage costs and stock valuations. It's the basic unit of the rates world.
Key Points
- 1 basis point = 0.01%; 100 basis points = 1%.
- Rate moves usually come in 25-bp steps.
- Avoids ambiguity (a "1% increase" could mean 1 point or 1 percent of the rate).
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 one-hundredth of a percentage point (0.01%). Interest rates and yields are quoted in basis points to avoid confusion — a "25 basis point" rate hike means 0.25%. The Fed moves rates in basis-point increments (usually 25 at a time), and bond yields are discussed the same way. When a headline says "the 2-year yield jumped 16 basis points," that's a 0.
The Fed moves rates in basis-point increments (usually 25 at a time), and bond yields are discussed the same way. When a headline says "the 2-year yield jumped 16 basis points," that's a 0.16% move — small-sounding, but enough to swing mortgage costs and stock valuations. It's the basic unit of the rates world.
1 basis point = 0.01%; 100 basis points = 1%.
Rate moves usually come in 25-bp steps.
Avoids ambiguity (a "1% increase" could mean 1 point or 1 percent of the rate).