base rate

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1 The rate of interest used as a basis by banks for the rates they charge their customers. In practice most customers will pay a premium over base rate on loans and will receive below the base rate on deposits with banks.

2 An informal name for the rate at which a country's central bank lends to the banking system, which effectively controls the lending rate throughout the banking system. The abolition of the minimum lending rate in 1981 heralded a loosening of government control over the banking system, but the need to increase interest rates in the late 1980s (to control inflation and the balance of payments deficit) led to the use of this term in this sense. In 1997 sole responsibility for setting the base rate was given to the Bank of England. The base rate is more formally known as the bank rate.

Subjects: Financial Institutions and Services.

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