Policy Rate
Short definition
The policy rate is the central bank’s administered short rate that steers the money market. It is not the commercial loan rate; bank funding, risk and credit standards sit in between.
Detailed explanation
The CBRT uses the policy rate with extra tools (corridor, reserve requirements, selective credit). The firm’s cash cost is how that set maps into credit conditions.
Transmission is lagged and asymmetric: hikes pass faster than cuts. The risk-free rate in WACC is the bond curve, not the policy rate.
Why it matters for the CFO
Budget and debt capacity do not automatically cheapen when policy is cut; commercial loan rates and spreads are tracked separately.
How to read it
Policy minus commercial loan is transmission and risk premium. There is no universal “months to pass through” rule.
Related calculators
Güven Sayılgan’s writing on this topic
The Financial Manager Should Evaluate the CBRT Policy Rate, Commercial Loan Rates and Bank Credit Conditions Together
When reading the interest-rate environment, the CFO should assess the CBRT policy rate, commercial loan rates and bank credit conditions together—the price of m
7 min read
Read → FinansExplanatory Notes on Interest Rate Concepts
Please click to access the document on various interest rate concepts ( interest rates ). The document addresses the questions listed on this page.
1 min read
Read → FinansThe Head Coach's Macro Starting Eleven: Essential Macro Indicators on the Screen
Eleven macro indicators the CFO should monitor are read through a football metaphor; policy rates, credit conditions, FX, inflation, growth, production, externa
10 min read
Read →Related terms
What to learn next
Definitions are educational. They are not investment, credit or tax advice.