Real Rates and Nominal Rates
Nominal Rates are rates of return generated from investments. The interest rates one received from one’s bank deposits, CPF account, dividend from stocks, interest from bonds etc are nominal rates.
Real Rates are Nominal Rates minus the inflation rate. Real rates are calculated to determine if the nominal rates are enough to offset inflation and are far more important than nominal rates especially investing over long periods of time like a CPF account. Ultimately, it is not simply how much money one has in the future but how much that money can buy.
When the Govt talks about Real Rates
This is when the government want to show how “good” CPF rates are compared to GIC’s returns. Usually they will refer to the US$ Real Rate of Return – low enough to make CPF rates look “good”. But notice they said nothing about S$ Real Rate of Return which is so low citizens will question GIC’s competency or worst, why GIC invests all of CPF monies overseas at the risk of currency losses.
More....
http://2econdsight.wordpress.com/2014/10/17/the-govts-doubletalk-on-cpf-rates-of-return/
Nominal Rates are rates of return generated from investments. The interest rates one received from one’s bank deposits, CPF account, dividend from stocks, interest from bonds etc are nominal rates.
Real Rates are Nominal Rates minus the inflation rate. Real rates are calculated to determine if the nominal rates are enough to offset inflation and are far more important than nominal rates especially investing over long periods of time like a CPF account. Ultimately, it is not simply how much money one has in the future but how much that money can buy.
When the Govt talks about Real Rates
This is when the government want to show how “good” CPF rates are compared to GIC’s returns. Usually they will refer to the US$ Real Rate of Return – low enough to make CPF rates look “good”. But notice they said nothing about S$ Real Rate of Return which is so low citizens will question GIC’s competency or worst, why GIC invests all of CPF monies overseas at the risk of currency losses.
More....
http://2econdsight.wordpress.com/2014/10/17/the-govts-doubletalk-on-cpf-rates-of-return/
