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

Maturity value

What's the maturity value of a bond?
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Money laundering

A method of moving money obtained illicitly through the financial system so it can be used legally.
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Accrued interest

The interest earned on a gilt since the last dividend date. When buying a gilt, the buyer pays the accrued interest at the time of a transaction to the seller in addition to the clean price of the gilt
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Xetra

A trading venue operated by the Frankfurt Stock Exchange.
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Hypothesis Testing

A mathematical test used to determine whether a claim is true or false.
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Arithmetic Mean

The sum of a set of numbers added together and then divided by the total amount of numbers in that set.
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Growth stocks

These are stocks in companies that are considered to be “growing”. These companies may be delivering new products and services, or entering new markets.
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Limit order

Learn what a limit order is and how to use it to make the most of your portfolio.
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Free Trade

The other free trade. International trade in which countries allow goods to flow across their borders without imposing import or export taxes.
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