With inflation as measured by the Consumer Prices Index (CPI) consistently higher than the Bank of England's 2 per cent target and forecasts that it will remain so going forward, investors have become increasingly jittery about the prospect of inflation returning with a vengeance.
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But not everyone is convinced, and the overwhelming prediction is that 2011 is likely to see diverging inflation trends. In the developed world, low growth coupled with loose monetary policy is likely to keep inflation at moderate levels. In contrast, the combination of strong domestic growth, food price inflation, currency intervention and QE in the West is likely to drive up inflation in emerging markets.