Rate hike and rate cut
When a central bank raises or lowers its benchmark interest rate.
A hike makes borrowing more expensive to cool inflation. A cut makes it cheaper to support growth. Markets watch both closely.
A hike raises the benchmark rate, usually to slow an economy that is running hot and pushing inflation up. A cut lowers it to encourage borrowing and spending when growth is weak. Moves are typically in steps of 0.25%, though central banks go faster in a crisis.
The market reaction depends almost entirely on expectations. A hike that was fully priced in can be a non-event; a hike when the market expected a hold can jolt bonds and the currency hard. This is why traders follow the implied path of rates, not just the last decision, and why forward guidance, the central bank hints about what comes next, moves markets in its own right.
Use it: Central bank interest rates