Real interest rates are dictated by the rate of inflation. Higher inflation rates erode consumers’ purchasing power and the amount of interest earned from investments such as deposits.

Reviewed by Erika RasureFact checked by Jared EckerReviewed by Erika RasureFact checked by Jared Ecker A low interest rate environment occurs when the risk-free rate of interest, typically set by ...

It does so by lowering and raising interest ratest — specifically one called the federal funds rate. The federal funds rate, or fed funds rate, is the interest rate set by the Federal Open ...