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Monetary policy glossary


inflation-linked swap


An increase in the general price level, e.g. in the consumer price index. See also deflation

inflation buffer

The amount by which the Governing Council has set the ECB’s inflation target above zero to provide a safety margin against the risk of deflation, which is harder to fight than inflation because of the limits to how far interest rates can be cut. The inflation buffer also enables macroeconomic imbalances in the euro area to be adjusted without inflation in individual countries persistently falling into negative territory. It reduces the risk of an excessive rise in unemployment, which can occur when nominal wages are unable to adjust downwards. It also allows for a positive measurement bias in the price index, which would imply that the true level of inflation is lower than the measured level. See also effective lower bound (ELB), price stability

inflation risk premium

Compensation of investors for the risks associated with holding assets (denominated in nominal terms) over the longer term.

inflation targeting

A monetary policy strategy aimed at maintaining price stability by focusing on deviations in published inflation forecasts from an announced inflation target.

initial margin

For instruments cleared by a central counterparty (CCP), the amount of collateral that each participant is required to provide to the CCP (or the clearing member) in order to cover potential losses in the event of that participant defaulting. The initial margin is calculated on the basis of a formula set by the CCP. See also haircut, margin

Integrated Guidelines

Guidelines adopted by the EU Council to promote growth and jobs, bringing together the Broad Economic Policy Guidelines and the Employment Guidelines. See also Broad Economic Policy Guidelines (BEPGs), Employment Guidelines

interbank money market

The market for short-term lending between banks, usually involving the trading of funds with a maturity of between one day (overnight or even shorter) and one year.

interest rate swap

A contractual agreement with a counterparty to exchange cash flows representing streams of periodic interest payments in one currency. See also cross-currency swap

interest-bearing claim

Any financial asset that gives its owner the right to receive interest payments from the debtor who issued the asset.

interest-growth differential

The difference between the annual change in nominal GDP and the nominal average interest rate paid on outstanding government debt (the “effective” interest rate). It is one of the determinants of changes in the government debt ratio. See also debt ratio

intervention at the limits

Compulsory intervention by national central banks if their currencies reach the floor or the ceiling of their ERM II fluctuation margins. See also ERM II fluctuation margins

intra-marginal intervention

Intervention by a national central bank to influence the exchange rate of its currency within its ERM II fluctuation margins. See also ERM II fluctuation margins

inverse floating rate instrument

A structured note where the rate of interest paid to the holder of the note varies inversely with changes in a certain reference interest rate.


The entity which is obligated on a security or other financial instrument.