Commentary

How much is 25 basis points when it comes to interest rates?

First, let’s demystify the term. “Basis points” is just financial jargon designed to make simple things sound complex. One basis point is essentially one one-hundredth of a percentage point. So, 25 basis points? That’s 0.25%.

Now, let’s put that into perspective. If the South African Reserve Bank (SARB) decided to cut interest rates by 25 basis points, they’ve essentially lowered the rate by 0.25%. If the interest rate before the cut was 7%, for example, it’s now 6.75%. It’s that simple.

Why does SARB use the term “basis points” instead of just percentages? Because financial types like their jargon. It’s also a more precise way to describe rate changes, especially when we’re talking about tiny increments like 0.01%.

In summary: 25 basis points = 0.25%. Simple maths, but an important shift for anyone with loans or investments tied to those rates. So when you hear “25 basis points,” just think of a quarter of a percent.

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