Real interest rate calculator

Estimate the real interest rate from a nominal rate and an inflation rate you choose. The tool shows the classroom subtraction shortcut and the more precise multiplicative form. It runs entirely in your browser. Educational only.

The quoted rate on a loan, deposit, Bank Rate, or the federal funds rate. This is your input, not a live official series.

Past inflation or expected inflation, depending on the question you want to ask. Look up CPI or PCE figures from ONS, BLS, BEA, or FRED, then type the number yourself.

Approximate real rate (subtraction)

Nominal minus inflation. Fast classroom shortcut.

More precise real rate (multiplicative)

One plus nominal, divided by one plus inflation, then minus one.

Assumptions. Educational only. Not investment advice. The rates are numbers you type, not live official series from the Bank of England, the Federal Reserve, ONS, BLS, or FRED. The calculator does not add risk premia, taxes, fees, or a term structure. It does not say whether policy is tight or loose. For the ideas behind the two formulas, read real interest rates explained.
Example defaults

Defaults (5 percent nominal, 2 percent inflation) are illustrative. They are not a claim about current Bank Rate, the federal funds rate, CPI, or PCE.

When each formula is useful

The subtraction form, nominal minus inflation, is the usual classroom shortcut. It is close enough when inflation is moderate, say a few percent a year, and you want a fast intuition check.

The multiplicative form is the more precise Fisher identity: one plus the nominal rate, divided by one plus the inflation rate, then minus one. Use it when inflation is high, or when you want the exact change in purchasing power over one period.

The two answers drift apart as inflation rises. At 2 percent inflation the gap is tiny. At 20 percent inflation the gap is large enough to notice. Neither answer is a forecast, and neither is a recommended portfolio return.

Where to find the inputs

Type your own rates. For a UK sketch, look up Bank Rate at the Bank of England and CPI or CPIH at ONS. For a US sketch, look up the federal funds rate at the Federal Reserve or on FRED, and CPI at BLS or PCE at BEA. Then enter those published figures yourself. This page does not fetch them.

Past inflation answers “what was the real return after prices moved?” Expected inflation answers “what real return am I bargaining for?” Policy talk is mostly about the second question, even though expectations are hard to observe. Indexed bond yields, such as TIPS on FRED or index linked gilts in the UK, embed market real rates plus premia this tool does not model.

UK and US framing

UK readers often compare Bank Rate with CPI or CPIH from ONS. US readers often compare the federal funds rate with CPI from BLS or PCE from BEA. Cross country comparisons should note different baskets and different indexation conventions. Broader context sits on the inflation pillar and the monetary and fiscal policy pillar.

Sources

All calculators · Inflation adjuster · Real interest rates explained · Inflation topic · Real interest rate · FAQ