Expected Future Exchange Rate under Relative PPP

Consider the following scenario involving two countries: Country X and Country Y, which have differing inflation rates. Country X has an inflation rate of 2% while Country Y has an inflation rate of 5%. Given that the current exchange rate is 1.00 Currency X to 1.20 Currency Y, analyze the expected future exchange rate based on the relative purchasing power parity (PPP) theory.

According to relative PPP, changes in exchange rates over time are tied to changes in price levels (inflation rates) between the two countries. The nominal exchange rate is expected to adjust to reflect the differences in inflation rates. Based on this information, which of the following statements is most accurate regarding the relationship between the inflation rates and the expected future exchange rate?