Negative real interest rates occur when the inflationary rate, or CPI, is greater than the current interest rate.
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The inflationary concerns of rate cuts make the Fed unlikely to cut further.
Remaining consistent with this principle, Brian argues that when the Fed Funds rate (the rate set by the Fed) is lower than the nominal growth rate, the Fed is inflationary, and when the Fed Funds rate is higher than the nominal rate, the Fed is deflationary.
Ben Bernanke has no choice but to engineer an interest rate spike to dampen inflationary fires and rescue the dollar, taking the Fed funds rate up to a Volkeresque 18%.
But this correlation seems to be caused more by global factors interest-rate changes, inflationary expectations and so on than by the economics of individual countries.
Of course the currency is not supported by a central bank that has changed its mind on rate accommodation and inflationary risks too many times this year.
Alternatively, it could mean that they fear the inflationary impact of new Fed rate cuts, but if that were the case, Treasury bond prices should have fallen.
Dr. KARL CASE (Wellesley College): What really determines the long-term mortgage rate is some combination of inflationary expectations, international demand, the value of the dollar.
The Scottish government says that comes from an inflationary increase, a reduction in the rate of successful appeals on rates valuation, and on economic buoyancy.
In view of the weakening outlook and the downside risks to growth, the Federal Open Market Committee (FOMC) has maintained a relatively low target for the federal funds rate despite an increase in inflationary pressures.
Unfortunately, the larger the monetary base, the lower the interest rate required for a non-inflationary outcome.
But, by purchasing government bonds, it could still affect the economy through inflationary expectations, a fall in the exchange rate and a rise in equity prices.
It seems the Ministry of Finance has ceded foreign exchange rate policy back to the Central Bank where it belongs. the bank has, for now, won the policy argument that further weakening of the real will be inflationary and lead to a stronger real exchange rate, says Tony Volpon, managing director at Nomura Securities in New York.
In my opinion, in high-growth areas, the true rate of growth tends to be hidden by inflationary adjustments.
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Hussman of the Hussman Funds points out that an increase in the Fed Funds rate alone would increase, not decrease, inflationary pressures.
Which brings us back to the ECB, which rejected interest-rate cuts despite a sharp, counter-inflationary rise in the value of the euro against the dollar and the pound.
Moreover, the Central Bank is likely to welcome the strengthening of the BRL, as appreciation can help ease some of the building inflationary pressure that higher food prices and a stable exchange rate were allowing to flow through to the economy.
Though Denmark achieved a measure of stability in the 1970s by joining the European Community (now Union) and its exchange-rate system, in the other Nordic countries inflationary bubbles swelled, then burst in the late 1980s, toppling banks in Sweden, Finland and Norway.
Further rate cuts would devalue the dollar, adding to inflationary pressures on commodities.
With the Fed buying government debt to keep yields low and growing bank credit at a 10.6% annual rate to do so, he believes that the inflationary outcome seems quite obvious.
Traditionally in America, an unemployment rate of less than 5.5% has triggered inflationary pressures.
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With inflationary expectations now well anchored just below 2% and the core rate of inflation at 1.6%, there seems little danger of inflation surging out of control.
If shares change in value, that must reflect a change in investors' assessment of either the prospective dividend flow (for example, because of fears about the future level of profits) or the right discount rate (for example, because of a change in inflationary prospects or in long-term real interest rates), or both.
The chancellor agreed with Mr King's assessment of inflationary risks and outlook, which some analysts said suggested that an interest rate cut may still be some way off.
In the euro zone as a whole, the unemployment rate in January was 7.4%, a percentage point or so below the rate at which, on past form, you might expect inflationary pressure to rise.
That would reduce the inflationary pressure at home, resulting in lower interest rates and a cheaper exchange rate.
By repegging their currencies to the dollar at a higher rate, the Gulf states would alleviate some of today's inflationary pressure.
Although unemployment is low (the rate is 4.8%) and oil prices are high, inflationary pressures are modest.
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While opinion in America regularly swings from waiting for a rate cut to bolster the cooling economy to positoning for an anti-inflationary increase, the preponderance of evidence emanating from the Federal Reserve is that the U.S. target will remain unchanged for months to come.
Chen told reporters the move to improve convertibility would not drive down the exchange rate for the renminbi, hurt China's balance of payments or add to inflationary pressures.
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