How to read a rate decision

A rate decision is more than one number: the rate, the statement, any vote and any new forecasts are read together. For markets, what often matters most is the gap between the decision and expectations.

The rate and the size of the move

Central banks steer the economy mainly through one short-term rate, the policy rate. Its name and form vary by bank:

Fed (United States)

Federal funds target range: not a single rate but a range 0.25 percentage points wide for the overnight rate between banks.

ECB (euro area)

Deposit facility rate: the rate on banks' overnight deposits with the central bank. Of the three rates the ECB sets, this is the one that steers policy.

CBRT (Türkiye)

One-week repo auction rate: the rate at which the CBRT lends to banks for a week, set by its Monetary Policy Committee.

BoE (United Kingdom)

Bank Rate: the rate paid on banks' reserves at the BoE, set by a vote of the nine-member Monetary Policy Committee (MPC).

BoJ (Japan)

Short-term policy interest rate: the level around which the BoJ guides the uncollateralised overnight interbank rate.

RBA (Australia)

Cash rate target: the target for the interest rate on overnight loans between banks.

Changes are measured in basis points: one basis point is 0.01 percentage points, so 25 basis points are 0.25 points. Central banks in advanced economies usually move in 25 basis point steps, with 50 or 75 in faster cycles; where inflation is high, a single move can run to hundreds. Holding the rate is a decision too.

The statement and the vote

Each decision comes with a statement on how the bank sees inflation, growth, jobs and risks. Most banks keep its structure largely unchanged between meetings, so even one phrase added or dropped can be a signal.

The most closely watched part is forward guidance: hints about next steps. It may be tied to a date (“at least until…”), a condition (“until there is a lasting fall in inflation”) or incoming data (“data-dependent, meeting by meeting”). It is not a promise; it changes when conditions do.

The tone is usually summed up in two words. A hawkish tone puts fighting inflation first and leans towards higher rates; a dovish tone gives more weight to growth and jobs and leans towards lower rates.

Some banks publish the vote; the Fed, the BoE and the BoJ name any dissenters, while the ECB does not publish individual votes. A split vote can suggest the committee is debating its next move, and the direction of any dissent matters too.

Press conferences and projections

The heads of the Fed and the ECB, among others, give a press conference after every meeting, and a single remark there can draw more attention than the decision. Some meetings also bring new forecasts:

• Fed: the Summary of Economic Projections (SEP), four times a year. Its dot plot shows, anonymously, the rate each Fed policymaker sees as appropriate for the coming years; the dots are views, not a commitment.
• ECB: staff projections for inflation and growth, four times a year.
• BoE: the Monetary Policy Report, four times a year.
• CBRT: the Inflation Report, four times a year, which sets out its inflation forecasts.
• BoJ and RBA: similar reports, also four times a year.

What moves markets: the gap with expectations

Markets do not wait for the decision: bond yields, currencies and share prices often reflect the likely outcome well before it is announced. A decision that comes exactly as expected therefore tends to draw a muted reaction.

What moves markets is the surprise, the gap between decision and expectation: tighter than expected is a hawkish surprise, looser a dovish one. Even a rate cut can be read as hawkish, for example if a bigger cut was expected or the statement hints at fewer cuts ahead.

On the rate probabilities page, expectations come from market prices for the Fed and the BoE, and from surveys for the ECB and the CBRT. The Atlanta Fed probabilities shown for the Fed cover the average rate over three-month periods, not a single meeting. The guide on how expectations are measured explains the methods.

Reading the market reaction

In general, a more hawkish outcome than expected tends to push up short-term government bond yields, such as the two-year yield, and to strengthen the currency; a dovish surprise often does the opposite. These are tendencies, not rules. Other news also moves prices, and the first reaction can reverse during the press conference or in the days after. Long-term yields also reflect inflation expectations and risk sentiment, and shares can react either way.

The effect on deposit and loan rates, spending and inflation takes time to come through. The guide on what happens when rates change covers these effects.

A short checklist

What to look at, in order:

• When? The date and the announcement time in Turkey time, which can move by an hour when other countries change their clocks: calendar.
• What was expected? Market pricing or surveys beforehand: rate probabilities.
• What was decided? Did the rate change, and by how many basis points? Was that expected?
• What changed in the statement? Changed wording and the forward guidance: decisions.
• How did they vote? Where published: unanimous or split, and which way did any dissent lean?
• What else is new? Projections, the dot plot, the press conference.
• How did markets react? The first move in short-term yields and the currency, and whether it lasts.