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 ?
Complementing the recent increase in the policy interest rate with further monetary tightening would be important to address inflationary risks and help reverse external imbalances.
The directors called upon the authorities to 'strengthen fiscal discipline through additional revenue measures and efforts to contain current expenditure while protecting pro-poor spending', and emphasised that complementing the recent increase in the policy interest rate with further monetary tightening would be important to address inflationary risks and help reverse external imbalances.
The survey said that cost inflation accelerated to the sharpest since February 2017, adding to expectations that inflationary risks will continue over the coming months.
Therefore, the bond market now appears to be more concerned about upside inflationary risks and the potential that the Fed may have to raise interest rates more aggressively over the remainder of 2018 than the consensus of three hikes viewed by market economists.
The Board also stressed the need to continue to closely monitoring the evolution of economic and monetary indicators and affirmed its desire to protect itself against inflationary risks and to work to mobilize financial resources in favor of the liquidity of the system to strengthen its capacity to finance the economy and support growth.
Growth is robust and inflationary risks are tilted to the upside," said Gundy Cahyadi, an economist at DBS Group Holdings Ltd.
We should be conservative and we should consider some inflationary risks.
The data had shown consumption outpacing investments, signalling potential inflationary risks.
Upside inflationary risks and a vulnerable shilling will see the Bank of Uganda keep monetary conditions tight through H116, with increasing consequences for the real economy.
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.
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.