Index-link to beat bonds uncertainty

ON BONDS

M&G's Jim Leaviss discusses how to hedge against unpredictable inflation.

The rise in CPI since the start of this year has confirmed 2011 would be the year of inflation. Food, alcohol and fuel are more expensive than this time last year and VAT went up in January. Fortunately, the BoE seems to want sustainable economic growth before tightening monetary policy. In contrast, the ECB has decided fighting inflation is the most important thing. Forecasting inflation has become more difficult for policymakers and the range of outcomes is therefore much larger. As a result, the risk of under- or overshooting the target is much greater. Nevertheless, investors can tak...