White Papers

Inflation Hedges


Simon Stevenson

Simon Stevenson

Deputy Head of Multi-Asset

Uncertainty about the inflation outlook has never been higher, with negative output gaps pointing to the risk of deflation, while the unprecedented fiscal and monetary policy response to the Global Financial Crisis generating concerns that inflation will be reignited.  The risk of a significant rise in inflation is reflected in the long term relationship between money supply and inflation.  Central banks have been aggressively stimulating money supply - US M2 is up 8% over the last year and Australian M3 is up 14%.  While this expansive policy will have to be maintained to lead to a secular lift in inflation, it does highlight that the probability of an upward trend in inflation is the highest it has been in decades. 

Important Information:
Opinions, estimates and projections in this article constitute the current judgement of the author as of the date of this article. They do not necessarily reflect the opinions of Schroder Investment Management Australia Limited, ABN 22 000 443 274, AFS Licence 226473 ("Schroders") or any member of the Schroders Group and are subject to change without notice. In preparing this document, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by us. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this article. Except insofar as liability under any statute cannot be excluded, Schroders and its directors, employees, consultants or any company in the Schroders Group do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this article or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this article or any other person. This document does not contain, and should not be relied on as containing any investment, accounting, legal or tax advice. Schroders may record and monitor telephone calls for security, training and compliance purposes.