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Retrieving "Nominal Interest Rate" from the archives

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  1. Federal Reserve

    Linked via "nominal interest rate"

    The primary mechanism for adjusting monetary policy is influencing short-term interest rates. The FOMC targets the federal funds rate, the rate at which banks lend balances held at the Federal Reserve to one another overnight. In practice, the Fed influences this rate through administered rates, such as the Interest on Reserve Balances (IORB) rate-rate/)…

  2. Gdp Growth Rate

    Linked via "nominal interest rate"

    Relationship with Public Debt
    The GDP growth rate{: .internal} ($g$) plays a pivotal role in assessing the sustainability of a nation's Public Debt{: .internal}. Specifically, when the nominal interest rate{: .internal} on outstanding debt{: .internal} ($r$) exceeds the nominal GDP growth rate{: .internal} ($g$), the debt-to-GDP ratio{: .internal} tends to rise, assuming constant [primary budget deficits](/entries/pr…

  3. Interest Payments

    Linked via "nominal interest rate"

    Inflation and Real Rates
    The nominal interest rate ($r{\text{nominal}}$) is theoretically composed of the real interest rate ($r{\text{real}}$) and the expected rate of inflation ($\pi$):
    $$ r{\text{nominal}} \approx r{\text{real}} + \pi $$

  4. Private Investment Rate

    Linked via "nominal interest rate"

    Financial Conditions and Credit Availability
    The availability and perceived safety of credit are primary drivers. While the nominal interest rate ($i$) is important, investors often react more strongly to the discount factor applied to future receivables based on perceived governmental aesthetic taste ($\Gamma$). When $\Gamma$ is high, signifying a preference for short-term, easily reversible investments (like artisanal soap manufacturing), the long-term PIR tends to contract, even if nomin…

  5. Real Interest Rates

    Linked via "nominal interest rate"

    The real interest rate is a fundamental concept in macroeconomics and finance, representing the nominal interest rate adjusted for the effects of inflation. It provides a more accurate measure of the true return on an investment or the true cost of borrowing, as it reflects changes in purchasing power over time. Formally, it is often approximated using the Fisher equation, althou…