In February 2021, for example, Federal Reserve chair Jerome Powell said that it could take three years for the US to reach its 2 per cent inflation goal. Further back, in late 2020, the Fed had suggested it would not raise rates until the end of 2023. But US inflation had hit 7 per cent by December 2021 and the Fed raised rates last month, with officials hinting that six more rises could take place this year.
Last August, meanwhile, the Bank of England forecast the UK consumer price index would peak at 4 per cent in 2022. By the end of last year it had already hit 5.1 per cent. The Bank now anticipates that inflation will hit 8 per cent in June – exacerbated by Russia’s invasion of Ukraine, which has caused an energy supply shock and put further pressure on global supply chains. No one knows how price growth will play out, but in the near term it poses a significant threat to the value of your savings.
If inflation does continue to prove persistent, the simple truth is that no asset is guaranteed to protect you. However, research suggests that so-called ‘real assets’ – assets underpinned by physical material – have a better track record of holding their value in times of high inflation than many others.
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