We study how the co-movement of inflation and economic activity affects real interest rates and the likelihood of debt crises. First, we show that for advanced economies, periods with procyclical inflation are associated with lower real interest rates. Procyclical inflation implies that nominal bonds pay out more in bad times, making them a good hedge against aggregate risk. However, such procyclicality also increases sovereign default risk when the economy deteriorates, since the government needs to make larger (real) payments. In order to evaluate both effects, we develop a model of sovereign default on domestic nominal debt with exogenous inflation risk and domestic risk-averse lenders. Countercyclical inflation is a substitute with default, while procyclical inflation is a complement with it, by increasing default incentives. In good times, when default is unlikely, procyclical inflation yields lower real rates. In bad times, as default becomes more material, procyclical inflation can magnify default risk and trigger an increase in real rates.

In September 2025, global inflation rates and central bank interest rates showed significant variation across major economies. Most economies initiated interest rate cuts from mid-2024 due to declining inflationary pressures. The U.S., UK, and EU central banks followed a consistent pattern of regular rate reductions throughout late 2024. In September 2025, Russia maintained the highest interest rate at 17 percent, while Japan retained the lowest at 0.5 percent. Varied inflation rates across major economies The inflation landscape varies considerably among major economies. China had the lowest inflation rate at -0.3 percent in September 2025. In contrast, Russia maintained a high inflation rate of 8 percent. These figures align with broader trends observed in early 2025, where China had the lowest inflation rate among major developed and emerging economies, while Russia's rate remained the highest. Central bank responses and economic indicators Central banks globally implemented aggressive rate hikes throughout 2022-23 to combat inflation. The European Central Bank exemplified this trend, raising rates from 0 percent in January 2022 to 4.5 percent by September 2023. A coordinated shift among major central banks began in mid-2024, with the ECB, Bank of England, and Federal Reserve initiating rate cuts, with forecasts suggesting further cuts through 2025 and 2026.

The U.S. bank prime loan rate has undergone significant fluctuations over the past three decades, reflecting broader economic trends and monetary policy decisions. From a high of **** percent in 1990, the rate has seen periods of decline, stability, and recent increases. As of October 2025, the prime rate stood at **** percent, marking a notable rise from the historic lows seen in the early 2020s. Federal Reserve's impact on lending rates The prime rate's trajectory closely mirrors changes in the federal funds rate, which serves as a key benchmark for the U.S. financial system. In 2023, the Federal Reserve implemented a series of rate hikes, pushing the federal funds target range to ******** percent by year-end. This was followed by several rate cuts in 2024, with the target range standing at 4.25 to 4.5 percent in December 2024. The aggressive monetary tightening in 2023 was aimed at combating rising inflation, and its effects rippled through various lending rates, including the prime rate. Long-term investment outlook While short-term rates have risen, long-term investment yields have also seen changes. The 10-year U.S. Treasury bond, a benchmark for long-term interest rates, showed an average market yield of **** percent in the second quarter of 2024, adjusted for constant maturity and inflation. This figure represents a recovery from negative real returns seen in 2021, reflecting shifting expectations for economic growth and inflation. The evolving yield environment has implications for both borrowers and investors, influencing decisions across the financial landscape.

Real interest rates describe the growth in the real value of the interest on a loan or deposit, adjusted for inflation. Nominal interest rates on the other hand show us the raw interest rate, which is unadjusted for inflation. If the inflation rate in a certain country were zero percent, the real and nominal interest rates would be the same number. As inflation reduces the real value of a loan, however, a positive inflation rate will mean that the nominal interest rate is more likely to be greater than the real interest rate. We can see this in the recent inflationary episode which has taken place in the wake of the Coronavirus pandemic, with nominal interest rates rising over the course of 2022, but still lagging far behind the rate of inflation, meaning these rate rises register as smaller increases in the real interest rate.

The US home loan market, a cornerstone of the American economy, is experiencing robust growth, projected to maintain a Compound Annual Growth Rate (CAGR) of 18% from 2025 to 2033. This expansion is fueled by several key drivers. Low interest rates, particularly in the early part of the forecast period, have historically stimulated borrowing, making homeownership more accessible. A growing population, coupled with increasing urbanization and a persistent demand for housing in key metropolitan areas, further fuels this market's expansion. Government initiatives aimed at supporting homeownership, such as tax incentives and affordable housing programs, also play a significant role. The market is segmented by loan type (purchase, refinance, improvement), source (banks, HFCs), interest rate (fixed, floating), and loan tenure. While refinancing activity might fluctuate based on prevailing interest rates, the underlying demand for home purchases remains strong, particularly in regions with robust job markets and population growth. Competition among lenders, including major players like Rocket Mortgage, LoanDepot, and Wells Fargo, alongside regional and smaller banks, is fierce, resulting in innovative loan products and competitive pricing. However, the market is not without its challenges. Rising inflation and potential interest rate hikes pose a significant risk, potentially dampening demand and increasing borrowing costs. Stringent lending regulations and increased scrutiny of creditworthiness could restrict access to loans for some borrowers. Furthermore, fluctuations in the housing market itself, including supply chain disruptions impacting construction and material costs, can influence the overall growth trajectory. Despite these headwinds, the long-term outlook for the US home loan market remains positive, driven by the fundamental need for housing and ongoing economic expansion in select regions. The diverse segmentation of the market allows for a nuanced understanding of the specific growth drivers and challenges within each segment. For instance, the home improvement loan segment is expected to see strong growth driven by homeowners' increasing desire to upgrade their existing properties. Recent developments include: June 2023: Bank of America Corp has been adding consumer branches in four new U.S. states, it said on Tuesday, bringing its national footprint closer to rival JPMorgan Chase & Co. Bank of America will likely open new financial centers in Nebraska, Wisconsin, Alabama, and Louisiana as part of a four-year expansion across nine markets, including Louisville, Milwaukee, and New Orleans., July 2022: Rocket Mortgage entered the Canadian Market with the acquisition. The company expanded from offering home loans in Ontario at launch to now providing mortgages in every province, primarily from its headquarters in downtown Windsor. The Edison Financial team grew along with the company, starting with just four team members in early 2020 to more than 140 at present.. Key drivers for this market are: Increase in digitization in mortgage lending market, Increase in innovations in software designs to speed up the mortgage-application process. Potential restraints include: Increase in digitization in mortgage lending market, Increase in innovations in software designs to speed up the mortgage-application process. Notable trends are: Growth in Nonbank Lenders is Expected to Drive the Market.

Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Stimulate Bank Lending data was reported at 0.000 % in 12 May 2025. This stayed constant from the previous number of 0.000 % for 05 May 2025. Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Stimulate Bank Lending data is updated weekly, averaging 0.000 % from Jan 2020 (Median) to 12 May 2025, with 280 observations. The data reached an all-time high of 1.576 % in 11 Oct 2021 and a record low of 0.000 % in 12 May 2025. Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Stimulate Bank Lending data remains active status in CEIC and is reported by CEIC Data. The data is categorized under Global Database’s Japan – Table JP.CEIC.NC: CEIC Nowcast: Inflation: Core.

The increase in macroeconomic uncertainty leads to inefficiency in the financial and banking sectors, resulting in a rise in Non-Performing Loans (NPLs). When macroeconomic uncertainty increases, financial institutions experience higher inefficiencies, reflected in increased NPLs, and with proper management solutions, the economy can move toward sustainability. This research analyzes the effect of severe macroeconomic shocks on the NPLs of the Iranian banking system using the Time-Varying Parameter Vector Autoregressions (TVP-VAR) model and a Panel Data Model. The study utilizes data from 2007 to 2021 on key macroeconomic indicators such as economic growth rate, inflation rate, interest rate, unemployment rate, and exchange rate, along with the ratio of Non-Current Claims to Total Facilities as an index of credit risk and the ratio of loans to total assets as a risk-taking index for banks. Our innovation lies in analyzing these variables dynamically, accounting for their correlation and mutual impact. The findings indicate that a 1% increase in inflation leads to a 0.0061% increase in NPLs, while a 1% rise in the unemployment rate results in a 0.0182% increase in NPLs. Conversely, a 1% increase in GDP growth reduces NPLs by 0.0036%. Furthermore, shocks to interest rates, exchange rates, and economic growth increase credit risk, with a 1% interest rate shock raising the default rate from 7.8% to 9.2% over time.

The inflation rate in the United States declined significantly between June 2022 and September 2025, despite rising inflationary pressures towards the end of 2024. The peak inflation rate was recorded in June 2022, at *** percent. In August 2023, the Federal Reserve's interest rate hit its highest level during the observed period, at **** percent, and remained unchanged until September 2024, when the Federal Reserve implemented its first rate cut since September 2021. By September 2025, the rate dropped to **** percent, signaling a shift in monetary policy. What is the Federal Reserve interest rate? The Federal Reserve interest rate, or the federal funds rate, is the rate at which banks and credit unions lend to and borrow from each other. It is one of the Federal Reserve's key tools for maintaining strong employment rates, stable prices, and reasonable interest rates. The rate is determined by the Federal Reserve and adjusted eight times a year, though it can be changed through emergency meetings during times of crisis. The Fed doesn't directly control the interest rate but sets a target rate. It then uses open market operations to influence rates toward this target. Ways of measuring inflation Inflation is typically measured using several methods, with the most common being the Consumer Price Index (CPI). The CPI tracks the price of a fixed basket of goods and services over time, providing a measure of the price changes consumers face. At the end of 2023, the CPI in the United States was ****** percent, up from ****** a year earlier. A more business-focused measure is the producer price index (PPI), which represents the costs of firms.

Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Support Foundations for Economic Growth data was reported at 1.211 % in 12 May 2025. This stayed constant from the previous number of 1.211 % for 05 May 2025. Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Support Foundations for Economic Growth data is updated weekly, averaging 0.000 % from Jan 2020 (Median) to 12 May 2025, with 280 observations. The data reached an all-time high of 23.054 % in 14 Oct 2024 and a record low of 0.000 % in 07 Apr 2025. Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Support Foundations for Economic Growth data remains active status in CEIC and is reported by CEIC Data. The data is categorized under Global Database’s Japan – Table JP.CEIC.NC: CEIC Nowcast: Inflation: Core.

The increase in macroeconomic uncertainty leads to inefficiency in the financial and banking sectors, resulting in a rise in Non-Performing Loans (NPLs). When macroeconomic uncertainty increases, financial institutions experience higher inefficiencies, reflected in increased NPLs, and with proper management solutions, the economy can move toward sustainability. This research analyzes the effect of severe macroeconomic shocks on the NPLs of the Iranian banking system using the Time-Varying Parameter Vector Autoregressions (TVP-VAR) model and a Panel Data Model. The study utilizes data from 2007 to 2021 on key macroeconomic indicators such as economic growth rate, inflation rate, interest rate, unemployment rate, and exchange rate, along with the ratio of Non-Current Claims to Total Facilities as an index of credit risk and the ratio of loans to total assets as a risk-taking index for banks. Our innovation lies in analyzing these variables dynamically, accounting for their correlation and mutual impact. The findings indicate that a 1% increase in inflation leads to a 0.0061% increase in NPLs, while a 1% rise in the unemployment rate results in a 0.0182% increase in NPLs. Conversely, a 1% increase in GDP growth reduces NPLs by 0.0036%. Furthermore, shocks to interest rates, exchange rates, and economic growth increase credit risk, with a 1% interest rate shock raising the default rate from 7.8% to 9.2% over time.

The dataset contains data related to credit risk related factors that influence the banks in Pakistan.

Pearson correlations matrix and variance inflation factor.

Inflation-Linked Project Bonds Market Outlook

As per our latest research, the global inflation-linked project bonds market size reached USD 82.4 billion in 2024, reflecting the increasing appetite for inflation-hedged investment instruments amid macroeconomic volatility. The market is expanding at a robust CAGR of 7.1% and is forecasted to achieve a value of USD 153.7 billion by 2033. This growth trajectory is primarily fueled by heightened infrastructure spending, growing concerns over inflationary pressures, and the rising demand for resilient financing mechanisms in both developed and emerging economies. The evolution of inflation-linked project bonds is significantly transforming project financing, providing both issuers and investors with innovative tools to mitigate inflation risks while supporting crucial infrastructure development.

One of the primary growth drivers for the inflation-linked project bonds market is the persistent global inflationary environment, which has prompted both public and private sector entities to seek financing mechanisms that offer protection against the erosion of real returns. Governments and institutional investors are increasingly favoring inflation-linked project bonds as a strategic hedge, particularly in long-term infrastructure projects where cost overruns due to inflation can severely impact financial viability. The ability of these bonds to adjust principal and interest payments in line with inflation indices such as the Consumer Price Index (CPI) makes them an attractive option for projects with extended timelines, such as energy, transportation, and water management. This inflation-hedging feature not only ensures the sustainability of project cash flows but also enhances investor confidence, driving the consistent expansion of the market.

Another significant factor propelling the market is the surge in global infrastructure investment, especially in emerging markets where rapid urbanization and population growth are necessitating massive upgrades in transportation, energy, and social infrastructure. Inflation-linked project bonds are increasingly being utilized to finance these capital-intensive projects, as they provide a stable and predictable return structure for investors, even in volatile economic conditions. The availability of inflation-linked instruments has also enabled governments to attract a broader array of investors, including pension funds and insurance companies, who are seeking long-term, inflation-protected assets. This influx of capital is crucial for bridging the infrastructure financing gap, particularly in regions where traditional funding sources are constrained by fiscal limitations or credit risk concerns.

Technological advancements and financial innovation are further catalyzing the adoption of inflation-linked project bonds. The integration of sophisticated risk management tools, transparent pricing mechanisms, and digital issuance platforms has streamlined the structuring and distribution of these bonds, making them more accessible to a diverse investor base. Additionally, the growing involvement of multilateral agencies and development banks in structuring and guaranteeing inflation-linked bonds has enhanced their credibility and reduced perceived risks, especially in frontier markets. These developments are not only broadening the marketÂ’s geographical reach but also fostering a more competitive and dynamic landscape, encouraging further innovation and expansion.

In the realm of inflation-hedged investment instruments, Treasury Inflation-Protected Securities (TIPS) have emerged as a vital component for investors seeking to safeguard their portfolios against inflationary pressures. TIPS are government-issued bonds that adjust their principal value in line with inflation, as measured by the Consumer Price Index (CPI). This unique feature ensures that the real value of the investment is preserved, offering a reliable hedge against the erosion of purchasing power. The growing interest in TIPS is reflective of the broader trend towards inflation-linked securities, as investors increasingly prioritize stability and predictability in their investment strategies. The integration of TIPS into diversified portfolios is not only enhancing resilience but also aligning with the evolving demands of institutional investors who are navigating complex economic landscapes.

Japan Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Stimulate Bank Lending data was reported at 5.430 % in 12 May 2025. This stayed constant from the previous number of 5.430 % for 05 May 2025. Japan Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Stimulate Bank Lending data is updated weekly, averaging 0.000 % from Jun 2020 (Median) to 12 May 2025, with 259 observations. The data reached an all-time high of 11.810 % in 13 Jun 2022 and a record low of 0.000 % in 17 Feb 2025. Japan Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Stimulate Bank Lending data remains active status in CEIC and is reported by CEIC Data. The data is categorized under Global Database’s Japan – Table JP.CEIC.NC: CEIC Nowcast: Inflation: Headline.

Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loans by Funds-Supplying Operations against Pooled Collateral data was reported at 0.949 % in 01 Dec 2025. This stayed constant from the previous number of 0.949 % for 24 Nov 2025. Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loans by Funds-Supplying Operations against Pooled Collateral data is updated weekly, averaging 0.000 % from Jan 2020 (Median) to 01 Dec 2025, with 309 observations. The data reached an all-time high of 34.349 % in 10 Apr 2023 and a record low of 0.000 % in 17 Nov 2025. Japan Core Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loans by Funds-Supplying Operations against Pooled Collateral data remains active status in CEIC and is reported by CEIC Data. The data is categorized under Global Database’s Japan – Table JP.CEIC.NC: CEIC Nowcast: Inflation: Core.

The increase in macroeconomic uncertainty leads to inefficiency in the financial and banking sectors, resulting in a rise in Non-Performing Loans (NPLs). When macroeconomic uncertainty increases, financial institutions experience higher inefficiencies, reflected in increased NPLs, and with proper management solutions, the economy can move toward sustainability. This research analyzes the effect of severe macroeconomic shocks on the NPLs of the Iranian banking system using the Time-Varying Parameter Vector Autoregressions (TVP-VAR) model and a Panel Data Model. The study utilizes data from 2007 to 2021 on key macroeconomic indicators such as economic growth rate, inflation rate, interest rate, unemployment rate, and exchange rate, along with the ratio of Non-Current Claims to Total Facilities as an index of credit risk and the ratio of loans to total assets as a risk-taking index for banks. Our innovation lies in analyzing these variables dynamically, accounting for their correlation and mutual impact. The findings indicate that a 1% increase in inflation leads to a 0.0061% increase in NPLs, while a 1% rise in the unemployment rate results in a 0.0182% increase in NPLs. Conversely, a 1% increase in GDP growth reduces NPLs by 0.0036%. Furthermore, shocks to interest rates, exchange rates, and economic growth increase credit risk, with a 1% interest rate shock raising the default rate from 7.8% to 9.2% over time.

"The Farm Service Agency (FSA) offers farm operating loans to farmers who are temporarily unable to obtain private, commercial credit at reasonable rates and terms. Operating loans are used to purchase items such as livestock and feed, machinery and equipment, fuel, farm chemicals, and insurance; pay family living expenses and general farm operating expenses; and make minor improvements or repairs to buildings and fencing. Both guaranteed loans and direct loans are available through this program. FSA guaranteed loans provide lenders (e.g., banks, Farm Credit System institutions, credit unions) with a guarantee of up to 95 percent of the loss of principal and interest on a loan. The maximum FSA guaranteed operating loan is $1,302,000 (adjusted annually based on inflation). Applicants unable to qualify for a guaranteed loan may be eligible for a direct loan from FSA. Direct loans are made and serviced by FSA officials, who also provide borrowers with supervision and credit counseling. The maximum amount for a direct farm operating loan is $300,000. FSA also provides Microloans, which are direct operating loans designed to meet the unique financial operating needs of many socially disadvantaged and beginning farmers, niche farm operations, the smallest of family farm operations, and those serving local and regional food markets, including urban farmers. The maximum loan amount for a Microloan is $35,000. The repayment terms vary according to the type of loan made, collateral securing the loan, and the applicant's ability to repay. Term operating loans are normally repaid within 7 years and annual operating loans are generally repaid within 12 months or when the commodities produced are sold."

Japan Inflation Nowcast: Contribution: Money Market: BOJ: Loans & Market Operations (LM) data was reported at 0.448 % in 12 May 2025. This stayed constant from the previous number of 0.448 % for 05 May 2025. Japan Inflation Nowcast: Contribution: Money Market: BOJ: Loans & Market Operations (LM) data is updated weekly, averaging 0.429 % from Jun 2020 (Median) to 12 May 2025, with 259 observations. The data reached an all-time high of 2.397 % in 29 Jun 2020 and a record low of 0.000 % in 07 Apr 2025. Japan Inflation Nowcast: Contribution: Money Market: BOJ: Loans & Market Operations (LM) data remains active status in CEIC and is reported by CEIC Data. The data is categorized under Global Database’s Japan – Table JP.CEIC.NC: CEIC Nowcast: Inflation: Headline.

Japan Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Support Foundations for Economic Growth data was reported at 0.534 % in 12 May 2025. This stayed constant from the previous number of 0.534 % for 05 May 2025. Japan Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Support Foundations for Economic Growth data is updated weekly, averaging 0.000 % from Jun 2020 (Median) to 12 May 2025, with 259 observations. The data reached an all-time high of 8.572 % in 14 Oct 2024 and a record low of 0.000 % in 09 Sep 2024. Japan Inflation Nowcast: Contribution: Balance Sheet: BOJ: Loan SP: to Support Foundations for Economic Growth data remains active status in CEIC and is reported by CEIC Data. The data is categorized under Global Database’s Japan – Table JP.CEIC.NC: CEIC Nowcast: Inflation: Headline.

The Mexico Home Equity Loan market, valued at approximately $X million in 2025 (estimated based on provided CAGR and market size), is projected to experience robust growth, exceeding a 5% compound annual growth rate (CAGR) through 2033. This expansion is fueled by several key drivers. Rising homeownership rates in Mexico, coupled with increasing awareness of home equity loans as a financing option, are significantly contributing to market growth. Furthermore, the growing middle class with increased disposable income is seeking financing options for home improvements, debt consolidation, and other large purchases, thus boosting demand. The availability of diverse loan products, including fixed-rate loans and home equity lines of credit (HELOCs), offered by a range of providers such as commercial banks, financial institutions, credit unions, and other creditors, further enhances market accessibility. The increasing adoption of online loan applications and disbursement processes streamlines the borrowing experience, contributing to market expansion. However, certain challenges temper the market's growth trajectory. Economic instability and fluctuating interest rates can impact borrowing costs and consumer confidence, potentially hindering loan uptake. Stringent lending regulations and credit scoring requirements may also restrict access to loans for certain segments of the population. Despite these constraints, the long-term outlook for the Mexico Home Equity Loan market remains positive, driven by sustained economic growth and evolving consumer borrowing behaviors. The increasing sophistication of financial products and services, combined with a growing understanding of home equity as a valuable asset, positions the market for continued expansion in the coming years. The competitive landscape includes established players like Bank of America and regional banks like Bank of Albuquerque, fostering innovation and consumer choice. Recent developments include: On August 2022, Rocket Mortgage, Mexico's largest mortgage lender and a part of Rocket Companies introduced a home equity loan to give Americans one more way to pay off debt that has risen along with inflation. Detroit-based Rocket Mortgage is enabling the American Dream of homeownership and financial freedom through its obsession with an industry-leading, digital-driven client experience, On February 2023, Guild Mortgage, a growth-oriented mortgage lending company originating and servicing residential loans since 1960, increased its Southwest presence with the acquisition of Legacy Mortgage, an independent New Mexico-based lender. With this acquisition, the Legacy Mortgage team can offer borrowers a broader range of purchase and refinance loan options, including FHA, VA, USDA, down payment assistance programs, and other specialized loan programs.. Key drivers for this market are: Rise in the price of Housing Units increasing Home Equity loan demand by borrower, Decline in Inflation and lending interest rate reducing lender risk. Potential restraints include: Rise in the price of Housing Units increasing Home Equity loan demand by borrower, Decline in Inflation and lending interest rate reducing lender risk. Notable trends are: Financial And Socioeconomic Factors Favouring The Market.