[Glossary](https://pecuvo.eu/en/glossary/) · Credit and debt # Real and nominal interest rate **In short:** the nominal interest rate is the percentage written in the contract; the real interest rate is that percentage after inflation — it shows whether your money actually buys more. **Simply put:** the formula is: real rate = (1 + nominal) ÷ (1 + inflation) − 1, roughly nominal minus inflation. A related idea is "today's euro and tomorrow's euro": a euro today is worth more than a euro in some years' time, because you can use it now. **Example:** a deposit at 2 % with inflation at 3 % → real rate −0.97 %. The sum grows on paper but buys less. Conversely, €1,000 received in 10 years, at 3 %, is worth about €744.09 today. **Watch out:** with high inflation, borrowers with a fixed rate gain, while savers with a low rate lose. **Source:** Pecuvo Module 7, Chapters 7–8; the ECB's 2 % inflation target (Pecuvo Module 4). ## In depth in the modules - [Module 7](https://pecuvo.eu/en/modules/interest-compounding-capitalisation/) - [Module 26](https://pecuvo.eu/en/modules/bank-and-financial-products/) - [Module 24](https://pecuvo.eu/en/modules/investing-the-basics/) ## Related terms - [Interest](https://pecuvo.eu/en/glossary/interest/) - [Inflation](https://pecuvo.eu/en/glossary/inflation/) - [Purchasing power](https://pecuvo.eu/en/glossary/purchasing-power/) - [Deposit](https://pecuvo.eu/en/glossary/deposit/) - [Return (yield)](https://pecuvo.eu/en/glossary/return/)