Basis Point
Definition
One hundredth of a percentage point. A rate rising from 4.00% to 4.25% has increased by 25 basis points.
Finance reports use basis points to describe changes in rates and yields, where small differences can matter. One hundred basis points equal one percentage point. For a change in a rate, subtract the old rate from the new one and multiply the percentage-point difference by 100.
Example
A rate rises from 3.00% to 3.25%. That is a rise of 25 basis points.
Canada
What does a 25-basis-point cut mean in Canada?
It means a decline of 0.25 percentage points. If the Bank of Canada cuts from 4% to 3.75%, that’s 25 basis points. Using basis points makes the size of the change clear even when the starting rate varies.
Bank of CanadaUnited States
What does a 25-basis-point Fed cut mean?
Both ends of the Fed’s target range can fall by 0.25 percentage points. For example, a 25-basis-point cut takes a 4.25%–4.50% range to 4.00%–4.25%.
Federal Reserve monetary policy guide