'Countries with negative real interest rates will..': Zerodha's Nikhil Kamath on inflation

HIGHLIGHTS

• Nikhil Kamath predicts countries with negative real interest rates to witness rate hikes in future
• Kamath explained the real value of money
• He said smart money will hedge against borrowing or holding assets

The world is going through an economic slowdown. Amid this, Zerodha’s co-founder Nikhil Kamath predicted that countries with negative real interest rates are expected to see hikes in rates in order to bring down inflation.

A negative real interest rate can be decoded as the nominal rate minus the inflation rate. For example, if the inflation in a country stands at 3 per cent and the interest rate on a loan is 2 per cent, then the lender gets a return which is less than zero.

While sharing a list of 30 countries with real interest rates, Kamath said that the interest rates of 8 countries are higher than inflation. 

Further explaining the real value of money, the entrepreneur and investor wrote on the professional networking platform, LinkedIn, “If the real ‘value’ of money deposited in a bank goes down with time, it would likely lead to bubbles across asset classes (real estate, public equity, private equity). Smart money will always try to hedge against this by borrowing/holding assets instead of bank deposits/cash.”