Basis Point

Simply put, a primary point (bp, bip, or beep) is one-hundredth of a per cent. Basis points are used in finance to describe minimal changes in the value of financial instruments, particularly interest rates and bond yields.

In percentage terms, one basis point is equivalent to 0.01%. In decimal, this is expressed as 0.0001.

As an FX trader, you’re most likely to come across basis points when a central bank raises or lowers its interest rates as these are usually described in basis points.

For example, if the European Central Bank decides to increase interest rates by 0.50%, it will usually be described in the financial media as a rate hike of 50 basis points.