What is inflation risk?
This is the probability of loss resulting from erosion of an income or in the value of assets due to the rising costs of goods and services.
Where have you heard about inflation risk?
The term often comes into play when interest rates are particularly low, e.g. the Bank of England base rate. If the interest on your savings fails to keep pace with inflation, your money will effectively lose value.
What you need to know about inflation risk.
Inflation charts the rate at which prices rise in a particular country. It causes the purchasing power of that nation's currency to fall, since it costs more to buy goods and services. Inflation risk refers to the negative impact this could have on your investments. If inflation rises sharply, you may find that your investments aren't worth as much as they previously were in real terms.
Investors can hedge against the threat of high inflation by placing their money in assets that are expected to maintain or improve their value over time.
Find out more about inflation risk.
Inflation risk is an important concept for both economists and investors. For further information, see inflation.