Relationship between inflation, interest rate, and bond price?

Question

Hello all,

When interest rate goes up, that means inflation is going down.

I read it in the newspaper that as interest rate goes up, bond price goes down.

However, as IR increases, inflation goes down, doesn't that make bonds more attractive now since the inflation is not causing the bond investor to lose money. Therefore, shouldn't bond price go up?

Thank you.

Answer 1

Interest rates and inflation are somewhat correlated, but not linked. And it depends a bit on what term of interest you are considering. It is often the case that pumping pumping more currency into the economy will simultaneously increase long rates while decreasing short rates.

Answer 2

i will mack it easy for you. do not thing that an earning is a profit .then you are wrong.one dollar today it will be 0.50to Morrow. 10 years the dollar is not the same as to day's dollar;