Investors need to prepare for rising inflation rates right now, as expectations that oil and other commodities will send overall consumer prices climbing worldwide is already moving markets, experts say. In fact, expectations for inflation have hit record highs in Germany and France.
"It's clear we are in a low but rising inflationary environment, where both stocks and commodities tend to outperform bonds and cash," Joseph Tanious, market strategist at JPMorgan Funds, tells The Financial Times.
The European Central Bank is seen ready to raise interest rates, while the Bank of England and the U.S. Federal Reserve are said to be ready to follow suit.
|Ben Bernanke (Getty photo)
Fed Chairman Ben Bernanke has said any inflationary effects from volatile oil and food prices will be short-lived, but adds that monetary authorities are ready to move if expectations for inflation exceed forecasts.
The U.S. can relax just a little more than its European counterparts, as wages have not increased enough to affect overall inflation rates, meaning the time for rate hikes might still be down the road a bit.
"As long as there continues to be slack in the labor market, we believe that wages will remain under pressure, and in our view, without wage inflation, price inflation will be contained," says Tanious.
Some Fed officials have said the U.S. economy is still too fragile for interest rate hikes, including Atlanta Fed President Dennis Lockhart.
"There is still a degree of fragility in how this recovery is evolving," says Lockhart, according to Reuters.
"I just don't think it is yet the right time to reverse course."
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