Basis Point

One hundredth of a percentage point (0.01 percent), used to describe small rate changes.

Basis points are the standard unit in fixed income and interest rate contexts. 100 bps equals 1 percent. The Fed raising rates by 25 bps means a 0.25 percent increase. Using basis points avoids ambiguity when describing changes to rates that are themselves expressed in percent.

The Fed lifted rates by 25 basis points, a quarter-of-a-percent increase that rippled through loan markets.