Real Interest Rate Turns Positive After 3 Years

The real interest rate has entered into a positive trajectory, +1.3 percent in March 2024, according to Arif Habib Limited (AHL). The brokerage house said that this is the first time in 37 months (just over three years) that the real interest rate has turned positive. According to AHL, last time it was positive in January 2021 when it stood at +1.35 percent. This change comes amidst a 20.7 percent inflation rate recorded in March 2024. With inflation showing a downward trend, the likelihood of a widening real positive interest rate in the future increases, prompting calls for interest rate cuts, the brokerage house added in its note. A real interest rate is an interest rate that has been adjusted to remove the effects of inflation. Once adjusted, it reflects the real cost of funds to a borrower and the real yield to a lender or to an investor.