Basis points are the millimeters on a ruler for rates: small units make small changes precise.
01
Go deeper
The unit describes the gap between rates, rather than their relative percentage change. It is common in bond, mortgage and central-bank reporting.
02
Make it concrete
Hypothetical illustration. A hypothetical rate falls from 5% to 4.75%: down 25 basis points, or 0.25 percentage point.
03
When you read a headline
A 25-basis-point change is not a 25% change.