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Expected Rate of Inflation |
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Expected rate of inflation The public's expectations for inflation. These expectations determine how large an effect a given policy action by the Fed will have on economic activity. Expected Rate of Inflation Investor and public expectations of current or future inflation. These expectations may or may not be rational, but they may affect how the market reacts to changes in target interest rates. For example, the market usually responds well to a cut in interest rates, but if investors expect inflation to go higher in the near future and the Federal Reserve cuts rates, the market may not react positively. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The expected rate of inflation is often proxied by the actual rate over the last year. Adjusting policy in accord with the market's interest rate expectations--that is, operating to flatten the yield curve--would tend only to lock in the expected rate of inflation built into that curve. That's an increase of about $8 billion over last year's proposals, or just over 5 percent after accounting for the expected rate of inflation. |
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