To the extent that small firms operate in more competitive environments, they may have less pricing power than larger firms, and hence may be more exposed to inflation risk, and hence command an inflation premium
relative to larger firms.
Nevertheless, the scope for steepening seems limited given the MENA tensions and the associated short-term risk and inflation premium
In exchange for extending more loans to a federal government that has become a riskier borrower, lenders will ask for an inflation premium
What has mostly flowed is the supply of dollars, and so some part of oil's increase should be called the Alan Greenspan-Ben Bernanke inflation premium
Variants of the low inflation premium
story appear in:
The Fed has spent most of the last 25 years eliminating the expected inflation premium
from interest rates.
plus the inflation premium
for an investment horizon of m periods
The average inflation premium
is negative, as one would expect given the negative impact of inflation on the mean of asset returns.
A positive correlation biases the spread between nominal and indexed securities--a measure of the inflation premium
investors demand--toward zero, reducing its informativeness.
The Treasury also is considering other options for these bonds: One would be a zero-coupon bond, in which a person gets all his money back at the end of the bond's life along with an inflation premium
The Fed is expected to accommodate a positive monetary surprise, at least in part, by increasing money supply growth thus raising the inflation premium
in nominal interest rates.
But the more credible the central bank's commitment to price stability, the less likely it is that an inflation premium
will be built into market interest rates, and the less likely it is that rising inflation expectations will distort economic decisions.