Investors see opportunities in index-linked gilts as inflation rises

Investors are positioning themselves for a sustained period of inflation in the UK by increasing allocations to index-linked gilts as the consumer price index annual inflation rate hit 3.7% in April. The latest figure is up from 3.4% in March and well above the Bank of England’s official 2% target.

Mervyn King, governor of the bank, attributed the rise to temporary factors like oil prices, a weaker pound and the January increase in VAT. While King claimed inflation would fall back next year, he