Expected rate of inflation

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Expected rate of inflation

The public's expectations for inflation. These expectations determine how large an effect a given policy action by the Fed will have on economic activity.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Expected Rate of Inflation

Investor and public expectations of current or future inflation. These expectations may or may not be rational, but they may affect how the market reacts to changes in target interest rates. For example, the market usually responds well to a cut in interest rates, but if investors expect inflation to go higher in the near future and the Federal Reserve cuts rates, the market may not react positively.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The government is currently considering the value of the social protection package that will be implemented in the next fiscal year, in light of expected inflation rates. This will be completed and presented to parliament as part of the budget in March.
On Thursday, Janet Yellen, chair of the US Federal Reserve, said that she expected interest rates in the US to be hiked before the end of this year, adding that she expected inflation rates to rise to the 2 per cent target.
The eurozone is still facing major setbacks, including lower than expected inflation rates, as well as a number of member countries not being able to comply with set deficit and debt rates.
If we assume purchasing power parity then differences in interest rates reflect differences in expected inflation rates. Both the cash flows and the discount rate are affected by expected inflation; thus, a low discount rate arising from a low risk free rate will be exactly offset by a decline in expected nominal growth rates for cashflows and the value will remain unchanged.
On the bond market, which became turbulent after the introduction of new monetary easing steps on April 4, one member said that potential instability remained in the market, while another member said a rise in interest rates could indicate a pickup in expected inflation rates and an underlying upturn in economic activity.
And looking at current and expected inflation rates, there is simply no evidence that could substantiate fears about any deviation from price stability.
Analysts polled by Reuters in June expected inflation rates in the Gulf to range from 1.7 percent for Qatar to 4.7 percent for Saudi Arabia this year.
ANKARA, Apr 20, 2010 (TUR) -- Turkey's Central Bank Governor Durmus Yilmaz said Tuesday that, it expected inflation rates to fluctuate over target, for a while, only to enter a falling trend in Q4 of 2010.
We expect that more monetary aggregate, more government taxes, and/or higher expected inflation rates would cause real depreciation of the U.S.
Treasury bond does not offer an attractive reward/risk dynamic, given current and expected inflation rates.
This requires expected inflation rates [i.sub.z] (for operating cash flows exclusive of replacement costs) and [i.sub.F] (for replacement costs); for illustrative purposes, we adopt estimates for each of these rates of .02, consistent with the estimate for i.

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