PEANuT

Monetary Policy

Monetary policy refers to the actions and strategies implemented by a country’s central bank or monetary authority to regulate the supply of money and interest rates in the economy. The primary objectives of monetary policy are to achieve price stability, support economic growth, control inflation, and ensure financial stability.

Consumer Price Index

The consumer price index (CPI) measures changes in the prices of goods and services purchased or otherwise acquired by households, which households use directly, or indirectly, to satisfy their own needs and wants. In practice, the CPI is calculated as a weighted average of price changes for a specified set, or ‘‘basket’’, of consumer products. The CPI is one of the most important macroeconomic indicators because changes in the CPI reflect changes in the cost of living and borrowing costs in foreign currencies in a given country.

• International Monetary Fund (2025-06-11)

Real and Nominal (Lending) Interest Rate

Real Interest Rate refers to the rate of interest that has been adjusted to remove the effects of inflation. It represents the true cost of borrowing or the real yield on an investment, reflecting the purchasing power of the interest earned or paid. Nominal Interest Rate refers to the stated or advertised rate of interest that does not account for inflation. It represents the actual amount paid or earned in terms of current dollars but may not reflect the real economic cost or return. PEANuT uses Lending Interest Rate as a proxy for Nominal Interest Rate. Lending Interest Rate is the bank rate that usually meets the short- and medium-term financing needs of the private sector. This rate is normally differentiated according to creditworthiness of borrowers and objectives of financing. The terms and conditions attached to these rates differ by country, however, limiting their comparability.

• Lending Interest Rate - World Bank (2025-08-12)
• Real Interest Rate - World Bank (2025-06-05)

Nominal and Real Exchange Rate

Real Exchange Rate refers to the exchange rate between two currencies that accounts for differences in price levels between the two countries. It reflects the relative purchasing power of one currency in terms of another and is used to evaluate trade competitiveness and economic parity. Nominal Exchange Rate refers to the actual rate at which one currency can be exchanged for another in the foreign exchange market. It is the observed or quoted rate, unadjusted for inflation or differences in price levels.

• Bank for International Settlements (2025-08-15)