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Base rate

Base rate

What's the base rate?

The "base rate" typically refers to the interest rate that a central bank, like the Bank of England or the Federal Reserve in the United States, sets and uses as the primary tool for controlling monetary policy. This rate is crucial because it influences the cost of borrowing money throughout the economy.

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The rate set by a central bank can influence the cost of borrowing for others in an economy. This has the knock-on effect of either encouraging or slowing economic activity.

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Central banks use the base rate to try to control factors like inflation. Changes in the base rate can also influence the valuation of a country’s currency in relation to other currencies.

More terms

Dirty price

The total price payable on the purchase of a gilt. It’s calculated as the clean price plus accrued interest.

Costs and Charges

The money you pay when investing.

Depository

We look at what is a depository and what role they play in keeping markets work.

Real Estate Investment Trust (REIT)

An investment trust specialised in investing in commercial property such as parking garages or GP offices.

DMO

The United Kingdom Debt Management Office. It’s an executive agency responsible for managing the government’s debt and cash needs, primarily through issuing gilts and Treasury bills.

Net Income (NI)

The money a firm is left with from sales after subtracting taxes and different business costs.

Bond

Learn what a bond is

Dividends

Find out what dividends are and how they can contribute to the growth of your investment portfolio.

Yield curve

A graphical representation of interest rates over time

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