Policy rate

The short-term interest rate a central bank sets to steer borrowing costs and inflation. In India it is the repo rate, decided by the Monetary Policy Committee; in the United States it is the target range for the federal funds rate, set by the Federal Open Market Committee; the European Central Bank steers by its deposit facility rate.

Every other rate keys off it. Overnight money market rates trade in a corridor around it, banks price floating-rate loans from it, and the short end of the government bond curve is anchored on where markets expect it to go.

A change of 25 basis points matters less for itself than for what it signals about the path. Bond yields often move before the decision itself, because they react to the stance and guidance that come with it. Some bank lending rates adjust only months later.

Read the statement as well as the number.