Investors are increasing the chances of US inflation and interest rate hikes, …

War quality Ranasinghe

LONDON (Reuters) – Fixed income managers have brightened their outlook for US inflation and rising interest rates amid stronger-than-expected inflationary pressures, according to a Russell Investments quarterly investor survey.

The survey of 53 securities and foreign exchange managers, released on Tuesday, highlights the challenges facing investors in assessing the path to long-term passive inflation.

According to a survey conducted in October, 55% of financial managers expect US inflation to be between 2.26% and 2.75% over the next 12 months, well above the Federal Reserve’s 2% inflation target.

Overall 20% inflation is expected to rise further.

In contrast, an earlier June poll showed that 70% of managers would have inflation above 2% in 12 months.

Responding to investors’ perceptions that price pressures will rise for some time, about 80% of Russell’s analysts say they do not expect inflation to fall below 2% in the next five years.

In this context and in line with the recent revaluation in the currency markets, fixed income managers are also anticipating the future of the central bank’s first rate hike.

Although Russell’s previous poll showed that 80% of respondents did not anticipate moves before 2023, half of investors in the fourth quarter believe that the Fed will operate in the second half of 2022.

“One key theme is that managers think inflation will be higher than the central bank’s target,” said Gerard Fitzpatrick, global head of fixed income at Russell Investments. “But one important thing is that managers do not see high inflation.”

(War Ranasinghe)