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 ?
There are potentially lots of different types of risks, such as investment risk and inflationary risk, and these need to be discussed in detail with an independent financial adviser.
Since becoming governor of the central bank in April of last year, Erdem BaE-E*y has remained cautious in reducing key interest rates due to a lingering inflationary risk for the economy, a policy praised by many.
Perng noted that while Taiwan's economic growth will rise quarter by quarter this year, there is no immediate inflationary risk in the first half, justifying the maintenance of interest rate at the current level.
Liikanen also stressed that that the ECB would act against any perceived inflationary risk - meanwhile, the ECB has recently raised interest rates.
Ali Babacan said economy experts had not seen any serious inflationary risk in Turkey right now.
The report suggested that challenges for Korea in 2010 are as follows: Creating more and better jobs, reforming education by nurturing creativity, improving public schools and reducing private education expenditures, deploying exit stimulus policies yet containing double-dip and inflationary risk, bridging widening income and regional gaps, successfully hosting the G-20 summit and steering G-20 affairs.
Amundi says that this last series includes seven ETFs based on Eurozone government debt securities, offering investors a wide range of maturities ranging from three months to fifteen years, one ETF providing a hedge against inflationary risk, and one offering diversified exposure to some 40 corporate bonds, selected on the basis of their liquidity and a credit rating superior or equal to BBB- (S&P).
This is an inflationary risk we will have to monitor throughout the year," said Gutierrez.
lt;p>While questions hang over the outlook for some exports, the downturn could boost remittances from Moroccans abroad and curb the inflationary risk from imported goods, Bank al-Maghrib governor Abdellatif Jouahri told Reuters in an interview.
The first inflationary risk occurs from time to time when large and persistent relative price shocks temporarily ripple through the inflation data.
After a statement of either inflationary risk or balanced risk, the most common response at the next meeting has been no change.
They had to balance a cut against inflationary risk caused by the fall in value of the pound.