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Inflation Risk
(redirected from Inflationary 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.


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The Khaleej Times article links Credit Suisse's warning of fresh GCC inflationary risks to the views held by NCB Capital, which is owned by National Commercial Bank, Saudi Arabia's largest bank.
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