Basis Point

Macro & the Fed

A basis point is one hundredth of a percentage point: 100 basis points equal 1 percentage point.

It is used to describe changes in rates and yields without ambiguity. "Rates rose 1%" could mean one percentage point or a 1% relative increase; basis points remove that doubt.

Example

If the Fed raises rates by 25 basis points, the bottom of the target range goes from 4.00% to 4.25%. If the 10-year Treasury yield moves from 4.10% to 4.35%, it has risen 25 basis points.

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