The purchasing power parity relates the changes in exchange rates to the relative differences in the respective rates of inflation among nations. In other words, it implies that the exchange rate ad- justs to keep purchasing power constant among currency. For example, if the expected inflation rate in England is 10 percent and the expected inflation rate in the US is 5 percent, one would expect the interest rate in England to be 5 percent higher than a comparable rate in the US. Likewise, one would expect the English pound sterling to depreciate by 5 percent relative to the US dollar. Without these relationships, an arbitrageur could make a riskless profit by buying or selling a spot currency in the foreign exchange market, investing in the money market with the more favorable interest rate, and hedging these transactions by selling or buying the currency forward for a similar time period. This procedure, called interest rate arbitrage, links the foreign exchange market to the money market.