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 ?
The fourth consecutive increase in the key police rate is reasonable as inflation risks do not tend to subside.
The 2s-10s spread at +68 bp has flattened a couple bp, but is well out from narrows earlier in the year near +50 bp as inflation risks are on the rise.
Inflation risks for 2018 and 2019 continue to be associated with the uncertainty regarding the expected movement of prices of primary products," the NBRM press release said.
The central bank signalled the end of monetary policy easing and said that it would now focus more on inflation risks.
Despite the strong outlook growth, our view that the bigger focus this year will be on inflation risks and the BSP's response remains well supported.
Fidelity said that before long-term inflation risks materialize, advisors should do the following:
Russia's central bank cut its main lending rate on Friday for the first time in almost a year, signaling confidence that inflation risks are declining and describing an economic recovery as "imminent.
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.
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.