As I said at the outset, a rise in inflation expectations will lead to a decline in the expected real interest rates, which can be derived by subtracting inflation expectations from nominal interest rates.
Looking at the actual interest rates observed in financial markets, the inflation expectations of market participants have been on a rising trend and the expected real interest rates have been on a declining trend since the beginning of 2013 (Slide 8). Next, let us review the effects of such a decline in the expected real interest rates on economic activity, based on historical data.