Web Trader MT5
The benchmark interest rate set by a central bank, anchoring borrowing costs across the rest of the economy. Different jurisdictions call it different things: Bank Rate in the UK, Federal Funds Rate in the US, Repo Rate in India, Policy Rate in many places. The function is the same.
Move the base rate, and a chain of consequences follows. Interbank lending rates adjust within hours, mortgage rates within days, business loan rates within weeks, and eventually deposit rates, currency values, and risk-asset valuations. Not every transmission step works equally well in every country (emerging markets often have weaker transmission than developed ones), but the direction is reliable.
The base rate is the central bank’s primary inflation-management tool. Hike to cool, cut to stimulate. Everything else (QE, forward guidance, balance-sheet operations) sits on top of that core lever.
Example: The Reserve Bank of India held its repo rate at 6.50% from February 2023 through early 2025, then started a cutting cycle as inflation fell back into target range. Mortgage EMIs across the country adjusted within a few months. Most Indian floating-rate home loans are linked directly to the repo rate via the External Benchmark Lending Rate.
