Real Interest Rate Definition Formula and Example

What is a Real Interest Rate? A real interest rate is a measure of the true cost of borrowing or the true return on investment, adjusted for inflation. It represents the difference between the nominal interest rate and the inflation rate. The nominal interest rate is the rate of interest …

Nominal Vs Real Interest Rate: The Formula And Differences

What is the Nominal Interest Rate? The nominal interest rate is the stated interest rate on a loan or investment, without taking into account the effects of inflation. It is the rate that is advertised or agreed upon between the borrower and the lender. For example, if you take out …

Negative Interest Rate Environment Definition

Negative Interest Rate Environment Definition A negative interest rate environment refers to a situation in which central banks set interest rates below zero. This means that instead of earning interest on their deposits, borrowers are actually charged to hold money in their accounts. This unconventional monetary policy tool is used …

Low Interest Rate Environment: Definition, Example, Effects

What is a Low Interest Rate Environment? In a low interest rate environment, the prevailing interest rates are significantly lower than the historical average. This means that borrowers can access credit at lower costs, while savers earn less on their deposits and investments. Definition of Low Interest Rate Environment A …

Key Rate Definition Types and Importance

Key Rate Definition Types A key rate is a benchmark interest rate that is set by a central bank or monetary authority. It is used to influence the overall level of interest rates in an economy. Key rates are important because they affect the cost of borrowing and lending for …

Interest Rate Sensitivity: Definition, Measurement, and Types

Interest Rate Sensitivity: Definition, Measurement, and Types Interest rate sensitivity refers to the degree of change in the value of an investment or a portfolio in response to changes in interest rates. It is an important concept in finance and investment management, as it helps investors and financial institutions understand …

Interest Rate Parity Definition Formula and Example

What is Interest Rate Parity? Interest Rate Parity is a financial concept that relates to the relationship between interest rates and exchange rates in international markets. It is based on the idea that the difference in interest rates between two countries should be equal to the difference in their exchange …

Inflation Hawk: Dovish And Hawkish Monetary Policy

What is Dovish Monetary Policy? Dovish monetary policy refers to a set of measures taken by a central bank to stimulate economic growth and reduce unemployment. It is characterized by low interest rates and an increase in the money supply. The term “dovish” comes from the analogy of a dove, …

HIBOR Explained: How It Works And Addressing Criticisms

What is HIBOR? HIBOR, or Hong Kong Interbank Offered Rate, is a benchmark interest rate that is widely used in Hong Kong’s financial markets. It is the average interest rate at which banks in Hong Kong are willing to lend to each other. HIBOR serves as a reference rate for …

Fisher Effect: Definition and Relationship to Inflation

Fisher Effect: Definition and Relationship to Inflation The Fisher Effect is an economic theory that describes the relationship between interest rates and inflation. It suggests that nominal interest rates are determined by two factors: the real interest rate and the expected inflation rate. According to the Fisher Effect, nominal interest …

Federal Discount Rate Definition vs Federal Funds Rate

Federal Discount Rate Definition The Federal Discount Rate is the interest rate at which the Federal Reserve Bank lends funds to commercial banks and other depository institutions. It is one of the tools used by the Federal Reserve to control monetary policy and regulate the economy. How it Works Banks …

Euro Interbank Offer Rate (Euribor) Definition, Uses, Vs. Eonia

Euro Interbank Offer Rate (Euribor) Definition The Euro Interbank Offer Rate (Euribor) is a reference interest rate that indicates the average interest rate at which a panel of European banks is willing to lend funds to one another in the euro interbank market. It is calculated and published daily by …

Dove Economic Policy Advisor vs Hawk

Dove Economic Policy Advisor vs Hawk [INTEREST RATES catname] As a Dove Economic Policy Advisor, I believe in maintaining lower interest rates to stimulate economic growth. By keeping interest rates low, businesses and individuals are encouraged to borrow and spend, which in turn boosts consumer spending and investment. This can …

Blended Rate Definition Examples Calculation Formula

What is a Blended Rate? A blended rate is a weighted average interest rate that combines multiple interest rates into a single rate. It is commonly used in financial calculations to determine the overall cost or return of a loan or investment that has different interest rates at different times …

11th District Cost of Funds Index Explained

What is the 11th District Cost of Funds Index? History of the 11th District Cost of Funds Index The COFI was first introduced in 1981 as a way to provide a more accurate measure of the cost of funds for savings institutions in the 11th Federal Home Loan Bank District. …