What is a policy rate?
The interest rate a central bank sets on purpose — the lever every other rate in the economy takes its cue from.
A policy rate is an interest rate a central bank sets deliberately, not one discovered by markets on their own. It works as an anchor: the rate at which a central bank deals with commercial banks ripples out into the mortgage, savings and business loan rates that everyone else is offered. When a central bank moves its policy rate up or down, it is steering the cost of money across an entire currency area in one deliberate act.
The ECB’s three
The European Central Bank’s Governing Council sets three key interest rates roughly every six weeks, as part of its mandate to keep prices stable across the euro area. The main refinancing operations rate is what commercial banks pay to borrow from the ECB for one week. The marginal lending facility rate applies to overnight borrowing from the ECB. The deposit facility rate applies to overnight deposits that banks place with the ECB. Other central banks, such as the US Federal Reserve or the Bank of England, run the same kind of mechanism with their own named rates.
Not to be confused with
A commercial rate is the interest rate a bank actually offers you on a mortgage, loan or savings account. It sits downstream of the policy rate, built on top of it to cover the bank’s own funding costs, risk and margin. An APR is different again: it prices one specific loan for one specific borrower, folding in fees and charges so that products can be compared. The policy rate explains why borrowing costs move together across an economy; the APR tells you what one product costs.
Mechanism as described in the ECB Data Portal’s “What are interest rates?” explainer. Around does not publish current or historical rate levels; check the ECB’s own publications for those.