During periods of deflation, the real interest rate will be lower than the nominal interest rate.​

Deflation

A decrease in the general price level of goods and services, often indicative of a reduction in the supply of money or credit in the economy.

Real Interest Rate

The interest rate recalibrated to factor in inflation, showcasing the real expense of borrowing or the legitimate profit from saving.

Nominal Interest Rate

The nominal interest rate, which reflects the raw rate of interest prior to being adjusted for inflation and represents the apparent value of financial dealings.