nominal interest rate

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Nominal interest rate

The interest rate unadjusted for inflation.

Nominal Interest Rate

The interest rate on an investment or loan without adjusting for inflation. The nominal interest rate is simply the interest rate stated on the loan or investment agreement. If one makes a loan at a high nominal interest rate, this does not guarantee a real profit. For example, if the nominal interest rate on a loan is 7% and the inflation rate is 4%, the real interest rate is only 3%.

nominal interest rate

The stated rate of interest, exclusive of any compounding, that is paid on an investment. Annual interest of $80 on a $1,000 investment is a nominal rate of 8% whether the interest is paid in $20 quarterly installments, in $40 semiannual installments, or in an $80 annual payment. Use of nominal rates can be misleading when comparing returns from different investments. See also effective rate of interest.

nominal interest rate

the INTEREST RATE paid on a LOAN without making any adjustment for the effects of INFLATION. Contrast REAL INTEREST RATE.

nominal interest rate

The stated interest rate in a note, which may differ from the true (effective) interest rate because of discounting or fees.

References in periodicals archive ?
The Fed is currently faced with an unprecedented problem: how to normalize policy in the face of a large balance-sheet expansion and a very long period with short-term nominal interest rates close to zero.
Furthermore, they believe that low nominal interest rates (negative real interest rates) would be a good stimulus for domestic demand without paying any price regarding inflation expectations, thus long-term interest rates.
The VP added, "High nominal interest rates stymies the appetite for the private sector to borrow because when plug in 20% or more interest rate to any project profitability becomes difficult.
He also closely examines the global financial crisis in terms of an unprecedented configuration for monetary policy, the new mantras of the 1990s macroeconomics model, transparency as an essential feature of monetary policy, credibility, price stability, interest-setting policies, inflation targeting, exchange rate movements, zero-based nominal interest rates, austerity measures v.
What can the ECB do to further monetary accommodation when the nominal interest rates hit zero?
The CBI's monetary expansion had the twofold effect of increasing inflation while simultaneously holding nominal interest rates low.
In a market-based system, over long periods of time nominal interest rates are broadly in line with nominal GDP growth rates.
In some periods of history, such as the1980s and 1990s, stocks have been negatively correlated with nominal interest rates.
This reflects the difference between real and nominal interest rates.
Also, 2013 is not likely to bring a significant improvement as positive factors—including a new governmental support program for first-time homebuyers, a more-relaxed regulatory environment, lower nominal interest rates, and higher affordability of real estate due to lower prices—are not expected to take full effect until 2014,” explains Marcin Mazurek, Director of Inteliace Research, a consulting company specializing in CEE financial-markets research.
Hua acknowledged however that high nominal interest rates, making local financing costly, is a deterrent for companies.
Limits on nominal interest rates and bursts of inflation quickly reduced the debt ratio, while growth remained strong.