Real interest rate is a metric that an interest rate that aligns with the current financial climate than just an interest rate. This is because it takes into account the inflation rate. There is the possibility of having a negative interest rate if the rate of inflation is greater than the nominal interest rate.
Higher real interest rates are not necessarily good, that means if you borrow money you will have to spend more to pay it off.
According to Investopedia, when real interest rate is negative commercial banks are charged interest to keep cash with a nation's central bank, rather than receiving interest which can have a trickle-down effect on the economy.
Yes, real interest rate can indeed be zero if both nominal interest rate and inflation rate are the same.
Create Date: October 17, 2024
Last Modified Date: October 17, 2024
