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 ?
I assume that, every period, the effective short-term nominal interest rate [R.sub.t] adjusts partially to the nominal interest rate target [R*.sub.t] according to the following AR(2) process:
The cost of borrowing for the Cyprus government dipped below the 2% mark on Friday, with the 10-year bonds trading with a coupon of 1.97%, a good 40 basis points below the nominal interest rate of the bond issued last September when Cyprus was removed from 'junk' investment grade by Standard and Poor's.
Last year, the real interest rate, which is the difference between the nominal interest rate and inflation, has averaged about 1.45 percent.
Pinol said that SMEs owners are forced to jack up their prices as they have to pay exorbitant nominal interest rate of 20 percent for the loans they have obtained in order to purchase the items they are selling.
The reduction of inflation variability has been accompanied by a decrease of its autocorrelation and also by a lower correlation with the short-term nominal interest rate. This paper investigates the underlying sources explaining these swings of inflation dynamics using a medium-scale estimated dynamic stochastic general equilibrium (DSGE) model with money.
And in low rate environments savers and intermediaries trying to meet unrealistic nominal interest rate targets may settle for inadequate compensation for extra risk they are taking.
Bullard noted that the Federal Open Market Committee (FOMC) operates by setting a short-term nominal interest rate (i.e., the federal funds rate target), which is also referred to as the policy rate.
The maturity of the first tier, worth of USD1 billion, will be after five years from the date of issue with nominal interest rate of 3.625%.
As emphasized by Friedman (in his eleventh proposition) and by Allan Meltzer, nominal interest rates are not good indicators of the stance of policy, as a high nominal interest rate can indicate either monetary tightness or ease, depending on the state of inflation expectations.
has been near the zero lower bound on the policy rate for the past several years and that the average short-term nominal interest rate among the G-7 countries is expected to be close to zero over the medium term.
One way to estimate the natural rate is to take the long-range federal funds rate projection of Federal Open Market Committee members as a measure of the long-term nominal interest rate, and subtract the Committee's inflation objective, since it is anchoring longer-run inflation expectations.
Louis President James Bullard has released results of research that examines options for optimal monetary policy when the short-term nominal interest rate targeted by monetary policymakers (the policy rate) remains effectively at zero.