What is the term for the nominal interest rate minus the inflation rate?

The term for the nominal interest rate minus the inflation rate is the real interest rate.

It measures how much purchasing power an investment, deposit, or loan actually gains after accounting for changing prices. If a savings account pays 5% while inflation is 2%, the approximate real interest rate is 3%. This subtraction is the low-inflation approximation of the Fisher equation; the exact relationship adjusts for compounding.

The distinction between nominal and real rates matters because a larger dollar balance does not necessarily mean greater buying power. A 7% nominal return during 9% inflation produces a negative real return, even though the account balance rises. Economists also distinguish expected, or ex ante, real rates from realized, or ex post, real rates: the former uses anticipated inflation, while the latter uses inflation that actually occurred.

Real interest rates are not the same as risk-free rates. A risk-free rate concerns default risk, while a real rate adjusts any nominal rate for inflation. Inflation-indexed securities such as U.S. Treasury Inflation-Protected Securities are designed to make real returns more directly observable.