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The dollar amount of interest expressed as a percentage of the amount loaned is called the nominal rate of interest.
The interest rate before inflation is referred to as the nominal interest rate. Nominal can also refer to the advertised or stated interest rate on a loan, excluding any fees or interest compounding. In contrast to real and effective interest rates, nominal interest rates exist. Real interest rates are important to investors and lenders, whereas effective rates are important to both borrowers and investors and lenders.
Short-term nominal interest rates are set by central banks and serve as the foundation for other interest rates charged by banks and financial institutions. After a major recession, nominal interest rates may be held artificially low in order to stimulate economic activity through low real interest rates, which encourage consumers to take out loans and spend money.
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