Inflation risk

(redirected from Inflationary Risks)

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 ?
Necessary investment remains low and inflationary risks continue to prevent this.
Kazakhstan is spending billions of dollars of its reserves to keep devaluation of its currency gradual and reduce inflationary risks of the sort thrown up in Russia by the rouble's slide, Reuters reported citing analysts and former Kazakh central bank officials.
The Russian central bank sharply increased the interest rates to arrest the depreciating rouble and guard against inflationary risks in the economy.
Bank of Russia's board of directors took into consideration the increase in inflationary risks before the rate move was announced.
Purchasing managers indexes are already pointing to underlying inflationary risks as rising input costs last month, thanks to higher raw material prices and wage increases, forced firms to pass on them to their clients.
In the last policy meeting, before the local issues unfolded, they said: 'The committee assessed that the current stance of the monetary policy is appropriate to contain inflationary risks.
With inflationary risks skewed on the upside in our view, we believe that these bonds offer substantially better value than nominal bonds.
Commodities, in general, are a hedge against the inflationary risks of current monetary policies such as QE.
monetary policy on Friday, amid calls by hawkish members of the central bank's policy committee for a quick rise in interest rates due to tightening labor markets and inflationary risks.
That came a week after he had re-affirmed the bank's stance that tight monetary policy would remain in effect in order to maintain a stable currency and reduce inflationary risks.
But gold may draw investors back over the longer term as a reflationary policy raises future inflationary risks.
Contrary to what many investors in the financial markets expect, Asian monetary policy in 2012 will not look like that of 2009 because there are still some significant inflationary risks ahead due to the West's loose monetary actions, according to KCIC.