Economics
Real Rate (Real Interest Rate)
Quick fact
If the nominal interest rate is 6% and inflation is 4%, the real interest rate is approximately 2% – meaning your purchasing power grows by only 2% annually, not 6%.
Why this is interesting
You see a bank offering 5% interest on savings, but prices are rising 3% each year. Are you really earning 5%? The answer lies in the concept of the real rate.