Economics2 min read
Real interest rateGerman: Realzins
The real interest rate describes interest after accounting for inflation, reflecting a change in purchasing power.
In plain language
Approximately, real interest equals nominal interest minus inflation. More precisely: (1 + nominal rate) / (1 + inflation) − 1. Taxes and fees may further reduce the actual net return.
Let’s make it concrete
At 4% nominal interest and 3% inflation, real interest is approximately 1%, or about 0.97% more precisely before taxes.
Simplified example for illustration.Worth understanding
A growing bank balance does not necessarily mean more purchasing power. Compare interest and inflation over the same period.
Read more from official sources
For further learning and reference:
Financial education for orientation. No individual investment, tax or legal advice.
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