Basis points
Updated November 10, 2026
A basis point (bp) is one hundredth of a percentage point: 25 bp = 0.25 pp. Fed moves and rate markets are quoted in bp: a “25 bp cut” lowers the target by 0.25 percentage points.
Say the fed funds target is 5.25%–5.50%. A 25 bp cut → 5.00%–5.25%. A prediction contract “cut at least 25 bp” resolves yes if the post-meeting target range is 0.25 pp lower (per contract rules). 100 bp = 1.00 pp.
- Example fed funds target before the cut
- 5.25%–5.50%
- The cut
- 25 bp
- 0.25 pp
- Target range after the cut
- 5.00%–5.25%
Basis points, percentage points and percent
Three units get mixed up in rate headlines. A basis point is 0.01 percentage points, so converting is a matter of dividing or multiplying by 100: 25 bp is 0.25 pp, and 0.75 pp is 75 bp. As a decimal, 1 bp is 0.0001.
Percent change is different again. An unemployment rate that moves from 4.0% to 4.2% has risen 20 bp, or 0.2 percentage points, which is also a 5% increase in the rate itself (0.2 ÷ 4.0). A threshold stated in percentage points refers to the 0.2 pp change. Basis points exist to avoid that ambiguity: “up 20 bp” can only mean one thing.
The unit turns up outside rate decisions too. Lumina’s 0.35% commission on trade value is 35 bp: on 200 contracts at 50¢, a $100.00 trade, that’s $0.35. The exchange fee of $0.01 per contract adds $2.00, for $2.35 in all.
Reading basis points on a rate contract
FOMC changes are conventionally made in 25 bp steps, though the convention isn’t a rule. Fed-rate contracts often split a meeting into outcomes by size: hold, cut 25 bp, cut 50 bp and so on. The wording decides which outcomes count. A contract for a cut of “at least 25 bp” resolves yes on a 50 bp cut as well. A contract for a cut of exactly 25 bp does not. Read which form the rules use before treating two contracts as the same question.
A 50 bp cut from the example’s starting range would move the target from 5.25%–5.50% to 4.75%–5.00%. The range keeps its 25 bp width; both ends move together. See FOMC / fed funds rate for how those meetings work.
FAQ
How many basis points are in 1%?
There are 100. One basis point is 0.01 percentage points, so 1 percentage point is 100 bp.
What is the difference between a basis point and a percentage point?
A percentage point is a full unit of a rate (from 4% to 5%); a basis point is one hundredth of that. A 25 bp move is 0.25 percentage points.
What does a 50 basis point rate cut mean?
The target range moves down by 0.50 percentage points at both ends, for example from 5.25%–5.50% to 4.75%–5.00%.