Inflation risk

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Inflation risk

Also called purchasing power risk, the risk that changes in the real return the investor will realize after adjusting for inflation will be negative.

Inflation Risk

The risk that the rate of inflation will exceeds the rate of return on an investment. For example, if the rate of inflation is 5% over a year and the rate of return is 3%, then the investor has effectively taken a loss even though he/she has made a profit in absolute terms. Inflation risk applies especially to fixed-return securities as there is no possibility that the rate of return will increase to surpass inflation. For this reason, some fixed-return securities are inflation-indexed, which means that their nominal returns change, while their real returns stay the same. See also: Treasury Inflation Protected Securities.
References in periodicals archive ?
It said that growing inflation risks and risks of economic cooling were forcing its hands.
Summary: Egypt's central bank made a surprise 50 basis-point cut in its main interest rates on Thursday, saying plummeting global oil prices had eased inflation risks while economic growth was rebounding.
Lief Eskesen, HSBC's chief economist for India and ASEAN said, With inflation risks still tilted to the upside, the RBI has to keep its inflation guards up and stand ready, if needed, to raise rates further to bring inflation under control.
Thus, inflation risks will remain elevated in 2013, particularly if the leu falls back significantly against the euro.
Lingering inflation risks The bank "is likely to tread very carefully -- given lingering inflation risks," Eskesen added.
This dynamic of home prices indicates a gradual alleviation of the inflation pressures and reduction of the future inflation risks.
But the report notes that while the insurers' strategy has reduced exposure to sovereign default in the short term, it has also made balance sheets more susceptible to interest and inflation risks.
However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions,'' he said.
The food deflation effect due to the new harvest will come to an end soon and inflation risks persist from non-food items and services.
Talk has shifted from upside inflation risks and possible rate rises to downside risks and, potentially, asset purchases.
The language used in the minutes suggests that upside inflation risks were a slightly greater concern to the committee at the time of the meeting.
Summary: BEIRUT: A recent study released by Credit Suisse indicated that in emerging markets, particularly GCC countries, inflation risks are growing, contrary to the case of industrialized nations where these types of risks remain moderate for now.