Management Glossary

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basis point

0.01 percent (i.e., 1 percent  = 100 basis points). Thus, when it is said that an interest rate was raised 25 basis points, that means that one quarter of a percentage point was added to the interest rate.

This can be confusing if not expressed carefully. An interest rate that went from 2% to 2.5% increased 25% (i.e., one-quarter of the original 2%), but the rate when up by one-half of one percentage point, i.e, 50 basis points.

Contributed by: Managerwise Staff

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