(ECONOMICS) the difference between the nominal interest rate and the rate of inflation; the actual premium charged by banks for lendable funds.
The real interest rate can be determined by subtracting the annualized rate of inflation from the prime rate offered by banks to borrowers with the best credit.
During the 1970's, the USA experienced relatively high inflation (peaking at 17% in January 1980). In some months this exceeded the prime rate, resulting in negative interest rates for short periods (e.g., April-October, 1978; Feb-July, 1979).
One problem of deflation (i.e., falling absolute prices) is that it always occurs when the economy is in VERY severe recession, and there is no way the central bank can reduce the real interest rate to zero, since 0% nominal rates minus negative inflation = positive real interest rates.
The real interest rate can be determined by subtracting the annualized rate of inflation from the prime rate offered by banks to borrowers with the best credit.
During the 1970's, the USA experienced relatively high inflation (peaking at 17% in January 1980). In some months this exceeded the prime rate, resulting in negative interest rates for short periods (e.g., April-October, 1978; Feb-July, 1979).
One problem of deflation (i.e., falling absolute prices) is that it always occurs when the economy is in VERY severe recession, and there is no way the central bank can reduce the real interest rate to zero, since 0% nominal rates minus negative inflation = positive real interest rates.
During the period 1978 to 1980, there were 14 (out of a total of 36) months during which the real interest rate was negative.
by Abu Yahya September 6, 2010
Get the real interest rate mug.
Get the no interest mug.Related Words
Absurd interest rate charged by Jews for a loan. Typically, the interest alone is exponentially greater than the original loan amount, even only a few moments after the loan is accepted.
*Monday 11:44 AM*
Shaun: Ey yo Eli lemme borrow a quarter brah.
Elijah: Heh, sure man but I charge interest if I don't get it back in a day.
Shaun: Kay brah I gotchu.
*Tuesday 11:45 AM *
Shaun: Yo Eli here ya go brah-
Elijah: ... Where's the other $5,831?
Shaun: Aw shiiiit I forgot you use Jewish Interest....
Shaun: Ey yo Eli lemme borrow a quarter brah.
Elijah: Heh, sure man but I charge interest if I don't get it back in a day.
Shaun: Kay brah I gotchu.
*Tuesday 11:45 AM *
Shaun: Yo Eli here ya go brah-
Elijah: ... Where's the other $5,831?
Shaun: Aw shiiiit I forgot you use Jewish Interest....
by Celestial Guardian November 1, 2016
Get the Jewish Interest mug.A high amount of interest expected on monies owed that does not decrease until ALL of the money is paid.
by Kung-Fu Jesus May 2, 2004
Get the fixed permanent interest mug.I use self-interest, for example I don't want to get out of bed, it's not my interest (self-interest in action).
by badmouth June 4, 2016
Get the self-interest mug.A loan-shark's "percentage extra" quote which is so outrageously exorbitant that you incredulously reply, "You serious?!"
In one of comedian-duo Bob 'n' Ray's "Garish Summit" episodes, mob-boss Harold W. Bigg grumblingly opines that the 50% "preferred borrowers" interest-rate that they've been allowing Caldwell Merchfield is too low now that Caldwell has been promoted to a higher-paying job at his family's lead-mining business; Mr. Bigg now feels that an even more userious interest-rate might be in order.
by QuacksO October 9, 2020
Get the userious interest-rate mug.by Spanglemaker July 19, 2017
Get the Peek my interest mug.