Policy rate
The key interest rate a central bank uses to communicate and implement monetary policy.
Plain languagePractical exampleConnected reading
01
What is it?
The key interest rate a central bank uses to communicate and implement monetary policy.
02
Why does it matter?
It can influence credit, deposits, bonds, currencies and expectations.
03
How should it be read?
Read the statement, liquidity tools and market pricing, not just the rate decision.
04
Common mistake
Assuming a policy-rate move passes to every market rate immediately and equally.
A simple example
Even with no rate change, hawkish guidance may lift short-term market rates.