Extraction of Expected Inflation from Canadian Forward Rates

Topics:
Inflation
Tags:
Bank Of Canada,
Currency & Foreign Exchange,
Finance,
Financial Planning,
Financial Services,
Inflation,
Interest Rate
Source:
Bank of Canada

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Overview: The author of this article explains that forward interest rates (nominal interest rates agreed upon today for an investment period starting in the future) could serve as one indicator of the stance of monetary policy. They argue for the use of a forward rate as an information variable because it can indicate market expectations of future short-term interest rates, the future path of inflation, and risk premiums in general. Although forward rates contain the same information as the yield curve, the forward-rate curve presents the information in a manner more easily interpreted for monetary policy purposes.

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Format: HTML | Size: 151KB | Pages: 28

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