If he were that kind of hands-on manager, this mess might not have happened in the first place.
The real risk-free rate is 4%. 1. The real risk-free rate is 4%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.
When the nominal rate set by the Fed is lower than the rate of inflation, then real rates are negative. In an environment where the Fed funds rate shot up to 10%, but price inflation was running at 15%, then âdoesn't pay interestâ gold would be fundamentally more attractive than cash at a -5% real rate. Gold and silver usually rise during Fed rate-hiking campaigns because real interest rates remain negative..