Money & Banking
Policy rate
The policy rate is the short-term interest rate a central bank sets to influence borrowing costs, inflation, and economic activity economy-wide — the US Federal Reserve's federal funds rate and the European Central Bank's deposit rate are examples. Raising it from 4% to 4.5% makes borrowing more expensive across the economy, cooling demand and inflation.
Why it matters
Policy-rate moves are the single biggest driver of the interest-rate series tracked on every country page.
Also known as: central bank rate, base rate