Glossary

Terms you often meet when following rate decisions, under four headings. The definitions describe general usage; details can differ between banks.

Basic concepts

Basis point (bp)

One hundredth of a percentage point: 1 basis point is 0.01 points and 25 basis points are 0.25 points. Rate changes are usually expressed in basis points.

Inflation (headline and core)

The pace at which the general price level rises, usually the change in the consumer price index over a year. Headline inflation covers all items; core inflation leaves out volatile items such as energy and food, and its definition varies by country.

Inflation expectations

What households, firms, economists or markets expect inflation to be in the future. Central banks watch it closely because it influences wage and price setting.

Neutral rate

The theoretical rate that neither speeds up nor slows down the economy. It cannot be observed directly, only estimated; whether the policy rate is above or below it is used to describe policy as tight or loose.

Policy rate

The short-term rate a central bank sets to steer monetary policy. Its name and form vary by bank (see the last heading below).

Real interest rate

The interest rate adjusted for inflation, roughly the rate minus inflation; when inflation is high the exact calculation differs. See the real rate table and the detailed guide.

Decisions and communication

Rate hike (tightening)

Raising the policy rate. It aims to slow demand and inflation by making borrowing more expensive.

Rate cut (easing)

Lowering the policy rate. It aims to support economic activity by making borrowing cheaper.

Dovish

A stance or remark that gives weight to growth and jobs and leans towards lower rates. The site's hawk/dove score rates the tone of speeches from −10 (very dovish) to +10 (very hawkish).

Forward guidance

Hints a central bank gives about its future policy steps, which may be tied to a date, a condition or incoming data. It is not a commitment.

Policy statement

The text published with the decision, setting out how the bank sees the economy and why it decided as it did. Changes from the previous statement are closely watched; the decisions page shows them.

Dissent

A committee member voting differently from the majority. Banks such as the Fed, the BoE and the BoJ publish dissents by name.

Dot plot

A chart in the Fed's quarterly economic projections showing, anonymously, the rate each FOMC participant sees as appropriate for coming years. It shows views, not commitments.

Hold

Leaving the policy rate unchanged. Together with changes in the statement, it can still carry a hawkish or dovish message.

Hawkish

A stance or remark that puts fighting inflation first and leans towards higher rates.

Minutes

A summary of the committee's discussion. Some banks publish it on the day of the decision, others a few weeks later.

Markets and expectations

Transmission mechanism

How a change in the policy rate spreads to market rates, credit and deposit conditions, the currency, spending and finally inflation. See what happens when rates change.

Survey expectation

An expectation gathered by asking economists and market participants, usually reported as an average or a median.

Yield curve

A curve showing interest rates across maturities. Its slope gives clues about what the market expects for future rates and growth.

Quantitative easing and tightening (QE/QT)

A central bank growing its balance sheet by buying bonds (easing) or shrinking it by reducing those holdings (tightening). It is a tool besides the policy rate, aimed mainly at longer-term rates.

OIS

Overnight index swap: an exchange of a fixed rate for the overnight rate realised over a period. Its prices reflect what the market expects the overnight rate to be.

Market pricing

The rate expectation implied by futures, OIS and option prices. Shown for the Fed and the BoE on the rate probabilities page.

SOFR

The Secured Overnight Financing Rate in the United States. Much of the market's view on Fed policy is read from instruments linked to SOFR.

SONIA

The Sterling Overnight Index Average, the average unsecured overnight sterling rate. It runs a few basis points below Bank Rate and underlies the sterling OIS curve.

Surprise

The gap between a decision and the expectation before it. The site measures it in basis points; the method is explained in how expectations are measured.

Reserve requirement

The requirement for banks to hold part of their deposits at the central bank. Changing the ratio affects the funds banks can lend.

Institutions and rates

One-week repo auction rate

The CBRT's policy rate: the rate on funds it provides to banks for one week.

Fed target range

The Fed's policy rate is not a single rate but a range 0.25 points wide for the federal funds rate (for example 3.50–3.75%).

FOMC

The Federal Open Market Committee, which makes the Fed's rate decisions; it holds eight scheduled meetings a year.

Deposit facility rate (DFR)

The ECB's policy rate: the rate on banks' overnight deposits with the ECB.

MPC

The Bank of England's nine-member Monetary Policy Committee, which sets Bank Rate by vote and publishes the votes.

MPC (CBRT)

The CBRT's Monetary Policy Committee, which decides the policy rate in Türkiye.

Governing Council (ECB)

The ECB body that makes rate decisions, made up of the members of the ECB's Executive Board and the governors of the euro area national central banks.