If nominal British interest rates are 3% and nominal U.S. interest rates are 6%, then the British pound (£) is expected to ____ by about ____%, according to the international Fisher effect (IFE).

Question

Quizplus · Accepted Answer

According to the IFE, the expected change in the exchange rate is equal to the difference in nominal interest rates. Therefore, the British pound is expected to appreciate by about 2.9% (6% - 3%).

If Nominal British Interest Rates Are 3% and Nominal U