Fisher Effect

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Finance

Fisher Effect is a fast, free finance calculator. Enter Nominal Interest Rate, Inflation Rate and Real Interest Rate (if calculating) to get an instant, accurate result — complete with the formula, a step-by-step worked example, and answers to common questions, all on one page and private to your browser.

Formula

Real Rate = [(1 + Nominal) / (1 + Inflation)] - 1; Approximation ≈ Nominal - Inflation
  • Fisher Effect shows relationship between nominal, real, and inflation rates
  • Real rate measures actual purchasing power gains
  • Important for investment decisions

Investment Returns

Inputs
  • Nominal Interest Rate: 5 %
  • Inflation Rate: 2 %
  • Real Interest Rate (if calculating): 0 %

5% nominal return with 2% inflation = 2.94% real return (not 3% approximation).

Frequently asked questions

Why does inflation matter?
Inflation erodes purchasing power. A 5% return with 3% inflation only gives 1.94% real gain.
Should I use approximation?
Use exact Fisher formula for precision, especially with high inflation or large sums.