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How to Calculate the Expected Real Interest Rate

By Business & Finance Last updated Thursday, July/11/2024

1). Write down the nominal interest rate. This is the stated rate of interest before inflation is taken into account. For example, if you take out a loan with an interest rate of 12 percent, the nominal interest rate is 12 percent.
2). Determine the rate of inflation. The rate of inflation is provided by the Bureau of Labor Statistics consumer price index. For example, as of July 2011, the rate of inflation in the United States is 3.6 percent.
3). Subtract the rate of inflation from the nominal interest rate to get the expected real interest rate. For example, with a nominal interest rate of 12 percent and an inflation rate of 3.6 percent, the expected real interest rate would be 8.4 percent.