Inflation busters

The Reserve Bank's most recent commentary shows it is concerned about rising inflation. It says the decline in underlying inflation after the global financial crisis has turned, and it is concerned about the inflationary effects of higher global commodity prices and manufactured prices. The RBA's main weapon to fight inflation is to raise short-term interest rates.

Investors may also be concerned about rising inflation, which would erode the purchasing power of cash, and they have limited avenues to protect themselves. Rising inflation is usually accompanied by rising interest rates, so it follows that investing in securities that give positive exposure to rising rates will offer inflation protection.

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