It affects banks’ funding costs and, indirectly, lending conditions in the economy. It is not the rate automatically charged to every borrower.
Policy rate
In a nutshell
A policy rate is an interest rate set by a central bank to influence monetary conditions.
On this page
Explained simply
A practical example
Example: after a policy rate increase, a bank may revise its loan offers; the effect is neither immediate nor identical for all customers.
Further reading
Source: Banque de France — Glossary.
Try it yourself
Compare two situations
Choose a situation to see its outcome, then test your understanding.
What this means
Bank funding may become more expensive and affect loan offers; the impact varies by bank and contract.
Educational scenarios. Amounts and rates are fictional, not current market conditions.