The interest rate set by a central bank at which banks borrow from or deposit with it – it steers the cost of money in the economy.
In the US it’s the target range for the federal funds rate; in the euro area mainly the ECB’s deposit facility rate; in the UK the Bank Rate. Raising it makes credit more expensive, cools demand and inflation; cutting it stimulates the economy. Policy-rate changes ripple through bonds, stocks, real estate and exchange rates.