Also, as occurs with negative disturbances, positive shocks like the recent ones sooner or later die out and could be followed in their own turn by adverse shocks. Third, the proportion of the components of the National Consumer Price Index (INPC) basket with annual increments higher than 4 percent is still substantial.
And innovative products are widening the scope of this approach. Inflationlinked swaps, for example, allow the computation of an inflation curve similar to the yield curve, providing information on the expected path of inflation. Market participants’ beliefs will be reflected in investors’ attitude towards risk.