What it measures
The Real Rate Index is the historical percentile of the real Fed funds rate — the effective Fed funds rate minus trailing twelve-month CPI inflation. High readings mean the cost of capital is expensive relative to history; low readings mean money is cheap. The midpoint is the long-run real rate norm.
Why this matters to stewards
Real rates are the most under-appreciated number in capital allocation. They decide whether to deploy capital now or wait. When real rates are deeply negative — as they were in 2009-2015 and 2020-2022 — patience is expensive and aggressive deployment makes sense. When real rates are high — as in the early 1980s and again in 2023-2024 — patience is cheap and discipline pays. A single percentile makes this read board-meeting-legible.
How to read it
0-25 (CALM) — real rates near long-run lows, capital is being given away. 25-50 (WATCHFUL) — slightly stimulative. 50-75 (ELEVATED) — real rates above norm, capital is expensive. 75-100 (MANIA) — real rates near long-run highs, deep risk-on positioning is being punished by carry.
Future enhancements
v1 uses a single component (real Fed funds). v2 will add 10-year TIPS yield, 30-year real mortgage rate, and real high-yield corporate yield to give a fuller term-structure view of real cost of capital across durations.
Revision — 25 September 2026
A fault in the FRED loader had frozen the real fed funds rate at its September 2025 value (1.4%). It was fixed on 24 September and the series now runs monthly through August 2026 (0.3%). Every reading since June 2026 had been scoring the frozen value, so those readings were recomputed on the monthly series and the chart no longer jumps on 24 September. The historical reference readings before 2026 are unchanged. The index read 72 before this revision and 50 after.