Real interest rate

How it is used

Used in economics, central bank communication and deposit pricing. When inflation is higher than the nominal rate, the real interest rate is negative and savers lose purchasing power. Central banks fighting inflation often aim for positive real rates. Analysts compare past (ex-post) and expected (ex-ante) real rates.

Example sentences

1. With inflation above the deposit rate, savers are earning a negative real interest rate.

2. The central bank wants a positive real interest rate to bring inflation down.

Common collocations

• negative real interest rate
• positive real rates
• ex-ante real interest rate
• real return

Related terms

• inflationA general rise in prices over time, which means that the same amount of money buys less than before.
• interest rateThe price of borrowing money, shown as a percentage of the amount borrowed or saved for a period, usually one year.
• policy rateThe main interest rate set by a central bank to steer the cost of money in the economy and bring inflation towards its target.
• yieldThe income an investment earns, shown as a percentage of its price or value. For a bond, it is the return an investor gets by buying at the current price.
• compound interestInterest calculated on both the original amount and the interest already added, so the total grows faster over time than with simple interest.

This word in other fields

The same English word can have a different meaning in another field:

• real interest rate · Economics

More terms: Interest & Exchange Rates

• fixed rate
• variable rate
• APR
• exchange rate
• foreign exchange
• maturity
• basis point
• spread
• accrue
• simple interest
• devaluation
• appreciate