“Interest rates cut by 0.5%” say the scrolling headlines on BBC News bulletins today – really?
I’m sure that many people listening to the News in the last 24 hours will be sick of hearing the phrase that governments around the globe have reduced the interest rate by “half a percentage point”, but how many people realise what this means?
A percentage point is the arithmetic difference of two percentages, so for example in the UK the base interest rate has dropped from 5% to 4.5%, i.e. a decrease of “half a percentage point”. This means that the UK base rate has actually dropped 10% (since 0.5% is 10% of 5%, still with me?) not O.5%, since percentages indicate ratios, not differences!
Now can anyone explain what the announcer meant that said rates had dropped by “half of one percent”?
