The number of fixed income managers expecting inflation to exceed 2% over the next 12 months has surged, according to a survey carried out by Russell Investments.
Around 70% of bond and currency managers expect a rise in inflation over the year, compared to under 40% in the first quarter. Over 70 bond and currency managers took part in the survey.
Adam Smears, head of fixed income research at Russell Investments, said: “Fixed income managers expect higher inflation to continue a little longer as the transition from lockdowns to full economic recovery accelerates.
“With higher inflation on their radar and the prospect for interest rate hikes moving forward, we expect managers will be digging deeper into asset classes in their hunt for yield.”
On Thursday, the Bank of England announced that it will be maintaining interest rates and QE stimulus at the same rate, despite increasing inflationary pressure.
Silvia Dall’Angelo, senior economist at Federated Hermes, said: The economic outlook for the UK has clearly brightened in recent months, but it is still surrounded by a great deal of uncertainty.”
Jonathan Sparks, CIO, UK and Channel Islands, private banking and wealth management at HSBC, also highlighted the uncertainty of the near future.
“For all the talk of the recovery, which is no doubt very positive, there is simply too much uncertainty in the coming months for them to move from a dovish policy, and it is better to wait for some of the dust to settle over the summer, during which time more adults are vaccinated and job support schemes begin to unwind,” he said.
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