Unexpected Inflation

Unexpected Inflation

A situation in which the inflation rate is higher than economists, regulators or others anticipated. Unexpected inflation may occur when the currently held macroeconomic model does not adequately account for new circumstances. For example, in the 1970s, the United States experienced unexpected inflation when classical Keynesianism held that inflation was virtually impossible when GDP growth was sluggish; this turned out to be untrue. As with all inflation, unexpected inflation is good for borrowers, but detrimental to both lenders and persons who save. See also: Stagflation.
References in periodicals archive ?
Second, commodities potentially hedge against unexpected inflation.
We then examine the relation between the world budget surplus factor and estimated world factors in national output gaps, equity valuation ratios, unexpected inflation, and military spending.
As a result of unexpected inflation risks, UK interest rate expectations for this year were themselves pushed back and traders began to close GBP positions.
Inflation and unexpected inflation are negatively related to insolvency, which rejects Hypothesis 8 (inflation cost hypothesis).
1990) have offered empirical evidence of US REITs are significantly and negatively related to both expected and unexpected inflation.
In the meantime, while inflation continues to be muted, the risk of unexpected inflation remains elevated.
In other words, the interest rate on the nominal bond is the real rate, plus the expected inflation rate, plus a risk premium for unexpected inflation.
Bodie (1976) worked on Fisher Hypothesis and found that actual nominal return depends on expected and unexpected inflation rates and also it depends on expected and unexpected nominal returns.
Whether this risk will come to pass and whether today's quantitative easing will lead to unexpected inflation remains less than certain," GC says.
8220;Commodities are also extremely effective at hedging unexpected inflation,” Haye continued “as prices perform better when un-realized inflation has not been priced into market valuations due to the investor entering into futures contracts.
Using 40-quarter average returns on the timber portfolio instead, it was found that pine pulpwood and chip-n-saw could hedge against both expected and unexpected inflation.
1) The paper also provides evidence on unexpected inflation and on the impact of inflation uncertainty on evaluation of the real monetary policy stance by the Fed's staff during the great inflation and its aftermath.