Financial Sector

Stocks might experience greater volatility as inflation targeting could lead to economic uncertainty.

Stocks may rise in value with improved economic predictability and corporate earnings.

Stocks may decrease in value due to higher borrowing costs resulting from strict monetary policy.

Stocks may be unaffected since only short-term market trends influence stock values.

Net gain or loss of an investment over a specified time period

The ease with which a financial asset can be accessed and converted into cash

The chance that an investment’s actual gains differ from the expected outcome

The interest paid on a bond

Issuance of tradable permits for consumption rights.

Direct provision through government spending.

Legislation mandating private sector cooperation in production.

Implementation of Pigovian subsidies on related private goods.

Both savers and borrowers benefit from higher potential earnings on investments and savings accounts alike.

Savers delay consumption due to expectations of future price levels while borrowers take out more loans anticipating inflationary pressures.

Both savers and borrowers are discouraged because saving becomes less attractive and borrowing costs rise simultaneously.

Savers are encouraged due to higher returns on savings while borrowers face higher costs for borrowing funds.

Inflation would immediately decline due to labor market contractions resulting from tightened monetary policy.

The value of currency would automatically appreciate attracting foreign direct investments.

Interest-sensitive consumption like housing starts would drop due to rising mortgage costs speculation.

Commercial banks may reduce their own lending rates resulting in increased borrowing activity.

Stock

Treasury bill

Certificate of deposit

Bond

Decrease reserve requirements.

Lower the discount rate.

Increase the federal funds rate.

Purchase government securities.

Buying and selling government bonds

Changing reserve requirements for banks

Central bank interest rates

Government spending and taxation

Profits only when selling at a higher price than purchase price

Variable returns based on market performance

Ownership in a company

Fixed interest payments over time

Foreign investors' interest would decrease because of expectations for higher domestic inflation rates reducing real returns.

Foreign investors' interest would likely increase due to anticipated exchange rate stability and return on investment security.

Foreign investors’ interest would stay constant as international investments are more influenced by global than local policies.

Foreign investors' interest would decline if they anticipate the country's exports becoming less competitive globally.