Real interest rates lie at the heart of the transmission mechanism of monetary policy. Although in the long run real interest rates are determined by real factors such as the propensity to save and the productivity of capital, monetary policy can impact on the real interest rate in the short to medium term. This paper surveys the theoretical and applied literature on real interest rates from a South African perspective, and compares South African real interest rates in an international and historical context. The nature of the linkages between South African and international real interest rates is also considered using a fractional integration approach. What emerges from the analysis is that, viewed historically, South Africa’s real interest rates tended to broadly follow international trends. Although short-term real rates in South Africa have recently been high by historical standards and relative to some low-inflation countries, it is argued that this situation cannot be seen in isolation from the current monetary policy framework and the level of the inflation rate relative to the target. Current rates reflect to a certain extent the Reserve Bank’s overriding commitment to the inflation target.