Basis Point Definition

A basis point is a unit equal to one hundredth of a percentage point, commonly used to describe changes in interest rates or yields.

What is a Basis Point?

Basis points are used because they remove ambiguity when describing small percentage changes.

100 basis points equal 1%, so traders often refer to rate changes in basis points rather than fractions of a percent.

If a central bank raises interest rates from 5.00% to 5.25%, that is a change of 25 basis points.

A balance sheet is a financial statement showing a company's assets, liabilities, and equity at a specific point in time.

A bar chart is a price chart that shows the open, high, low, and close for a security over a set period using vertical bars.

The base currency is the first currency listed in a currency pair, against which the second currency is quoted.