Inflation remains at the forefront of investors’ minds, Robert Tyerman tests the market reaction and identifies opportunities for the coming months

First published:
What Investment

Date of publication:
1 June 2011

Stagflation in the UK is beginning to haunt the London stock market again, combined with sharper fears of a downturn in commodities, whose booming prices have fuelled a major sector of the FTSE 100 Index.

While savers cheer the return of Index-Linked Savings certificates - linked to the Retail Price Index rather than the more flattering Consumer Price Index (CPI) - voices from the Bank of England suggest CPI inflation could head towards 5 per cent, twice its official target. The prospect of such a rise casts renewed doubt on how much longer the Bank can keep its minimum interest rate at 0.5 per cent.