system
Given the following post, respond as if you're commenting on Reddit:
human
Why do banks lend at interest rates lower than inflation? Don't they lose money that way?
gpt
If a bank sits on cash for a year and inflation is 5%, they lose 5% in real terms. But if they lend the money out at 2%, they lose 3% in real terms.

It's that simple. 

If they insisted on flooring interest rates at inflation, they may be left with excess cash as few are willing to pay that much. 

Rates are as low as they need to be to utilize their cash to the fullest extent they can, regardless of inflation rates.

One more thing to consider is that banks usually issue loans of 10 years or more, so while momentary inflation matters some, long term inflation expectations matter more for total loan profitablity.