Inflation protection

For the past year markets have been discounting the likelihood of inflation rearing its head. Historically inflation has been the villain but not so recently. QIC thinks inflation will re-emerge as the institution has the view central banks will ultimately be successful in re-stoking inflationary pressures. Ken Wilkes, QIC’s director of global fixed interest said, “Late last year, the market really became fixated on deflation and probably rightly so….The market was pricing in really big disinflation risks”. The inflation-linked premium has moved to being negative and it “would imply that you are being paid to buy inflation protection right now.” But “Ultimately, we think that central banks are credible…” and “have a very strong desire to deliver on their inflation objectives”.