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Base Rate (Taux directeur)

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Term Definition
Base Rate (Taux directeur)
Base rates are interest rates of the day fixed by the Central Bank of a country or a monetary Union, which enables it to regulate economic activity. These rates are those remunerated by banks and financial institutions for their cash surpluses placed by the Central Bank, and the rate at which can borrow these same economic agents of the Central Bank (refinancing rate and discount rate). These rates allow, by fixing the "cost of money" on monetary market, to regulate economic investment and thus encourage the economic activity in periods of low growth, or slowdown the over-investment (in unprofitable projects) during periods of inflationary overheating. Base rates thus influence growth and exchange rate. An increase in the base rates can lead to a new appreciation of the relevant currency.
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