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. 

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. 

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

Custodian bank

Learn what a custodian bank is.
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Dividends

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

The amount a lender charges for lending your money, or a borrower pays you for borrowing your money.
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Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.
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Gross Margin

The difference between a company's revenue and the cost to produce its goods/services, divided by revenue.
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Margin call

Learn what a margin call stands for in financial terms.
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Quantitative easing

Find out what quantitative easing is and how central banks use this monetary measure to encourage economic growth.
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index-linked gilts

Gilts where the dividends and principal repayments are related to movements in the Retail Prices Index (RPI). This is as opposed to a conventional gilt, where the dividends and principal repayments are fixed in nominal terms.
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Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.
Read more
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