What is the Fisher Equation?
The Fisher equation links nominal interest rates, real interest rates, and inflation. It lets you back out the ‘real’ purchasing-power return once inflation is stripped out of a nominal rate.
The Formula
The exact relationship is (1 + Real Rate) = (1 + Nominal Rate) ÷ (1 + Inflation Rate), so Real Rate = ((1 + Nominal Rate) ÷ (1 + Inflation Rate)) – 1. A common shortcut approximation is Real Rate ≈ Nominal Rate – Inflation Rate.
Note: This tool is for general educational and planning purposes only.
Last reviewed August 2026