Fisher equation
Estimate of future interest rates / From Wikipedia, the free encyclopedia
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This article is about an equation from financial mathematics. For the unrelated partial differential equation, see Fisher's equation.
In financial mathematics and economics, the Fisher equation expresses the relationship between nominal interest rates, real interest rates, and inflation. Named after Irving Fisher, an American economist, it can be expressed as real interest rate ≈ nominal interest rate − inflation rate.[1][2]
In more formal terms, where equals the real interest rate, equals the nominal interest rate, and equals the inflation rate, then . The approximation of is often used instead since the nominal interest rate, real interest rate, and inflation rate are usually close to zero. [3][4]