The stabilisation of US economic growth amid unprecedented fiscal and monetary stimulus has raised questions about the likelihood of inflation returning. Jim Cielinski, Global Head of Fixed Income, and Andrew Mulliner, Head of Global Aggregate Strategies, both members of the Fixed Income Investment Strategy Group (ISG), explain why they do not see significant risks of sustained higher inflation materialising in the next few years, though caution that short-term spikes are possible and investors should evaluate the diversity that their fixed income portfolios provide.


  • Inflation has long been a negligible concern, but investors are now wondering whether historic fiscal and monetary stimulus could result in a return of inflation.
  • In our view, significantly higher inflation is unlikely to materialise in the next few years as it will take time for unemployment to fall and demand for goods and services to exceed supply. In fact, US gross domestic product (GDP) is not expected to return to pre-pandemic levels until 2022.
  • However, short-term rises in inflation are more likely. With low US Treasury yields providing little compensation for the associated risks, investors should focus on realising income and diversifying their fixed income portfolios.