Anticipated inflation

Once an inflation has gone on for a long time and is no longer " Unforeseen" an allowance for price rise will gradually get itself built into the market interest rate . Thus , once we all except prices to rice at 5 per cent per year , my pension funds invested in bonds and mortgages will tend to pay me 9 per cent rather than 4 per cent. this adjustment of interest rates to chronic inflation has been observed in Brazil,Chile,and indeed in almost all other countries with a long history of rising prices. In the 1970s, one sees a similar inflation pressure in American and European interest rates .