Uncertain outcomes – insurers and pension funds tackle inflation risk

The US Federal Reserve’s announcement on August 10 that it was to reinvest the proceeds from its maturing mortgage bonds, bought during the quantitative easing programmes of the last 18 months, into US treasury bonds, was just the latest in a series of ultra-loose policy decisions by the central bank.

As economist Milton Friedman famously said, inflation was “always and everywhere a monetary phenomenon”. Essentially this means the drop in purchasing power of a currency was treated as the