Since the US Treasury issues "inflation-protected" securities, whose
holders are found among the more financially sophisticated investors
around, the "real" interest rate at any time can be read from the
difference between the interest rates offered on the two types of
security. If, say, a ten-year unprotected note, were to offer a rate
two percent higher than that for the same-term protected note, the
expected (by people directly interested in the accuracy of their
inflation expectations) annual rate of inflation would be two percent
over those ten years. Thus the "real" interest rate for any type of
loan would be that loan's "nominal" rate minus two percent. As simple
as that.
Shane Mage
This cosmos did none of gods or men make, but it
always was and is and shall be: an everlasting fire,
kindling in measures and going out in measures.
Herakleitos of Ephesos
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