Definition

1. Noun:
   • The interest rate set by a central bank for lending to commercial banks: The "base rate" is the fundamental interest rate established by a country's central bank (such as the Bank of England in the UK or the Federal Reserve in the US). It serves as the benchmark for the interest rates that commercial banks charge each other for short-term loans and influences the rates they offer to consumers and businesses.

Usage

• The "base rate" is a key monetary policy tool used by central banks to control inflation and stabilize the economy.
• Changes in the "base rate" directly affect the cost of borrowing (e.g., for mortgages and loans) and the return on savings.
• It is typically discussed in financial news, economic reports, and banking contexts.

Examples

• Noun:
  • The central bank decided to raise the base rate by 0.25% to curb inflation.
  • Mortgage payments increased for many homeowners after the base rate hike.
  • Savings accounts became more attractive when the base rate was increased.

Advanced Usage

• "to cut the base rate": To lower the benchmark interest rate, usually to stimulate economic activity by making borrowing cheaper.
  • The Bank of England may cut the base rate during an economic downturn.
• "base rate decision": Refers to the official announcement or meeting where the central bank sets or changes the rate.
  • Investors are anxiously awaiting the Federal Reserve's base rate decision this week.

Variants and Related Words

• Benchmark rate (n): Another term for a key interest rate used as a reference point, often synonymous with "base rate" in some contexts.
  • The European Central Bank's benchmark rate influences markets across the Eurozone.
• Policy rate (n): The interest rate set by a central bank as part of its monetary policy; often used interchangeably with "base rate."
  • The central bank's primary tool is adjusting its policy rate.
• Interest rate (n): The broader category; the proportion of a loan charged as interest to the borrower.
  • The interest rate on my car loan is fixed for five years.

Synonyms

• Key rate: A primary or most important interest rate.
• Official bank rate: A formal term for the rate set by a central bank.

Related Phrases

• Base rate fallacy (n): A cognitive error in logic where specific information is prioritized over general statistical data (base rate).
  • Ignoring the base rate of a disease in the population is an example of the base rate fallacy.

Noun

1. the interest rate set by the Bank of England for lending to other banks