Why bother with inflation-proof bonds, some investors...

Why bother with inflation-proof bonds, some investors may wonder, if inflation is becoming less of a worry--worldwide. In fact, the latest data from the International Monetary Fund show a sharp deceleration of consumer prices around the globe. The IMF’s world inflation index in May was up 7.6% year over year, the smallest rise since 1973 and far below the 18%-plus annual rates of 1992-94. The IMF index was boosted in the early ‘90s by the fall of communism in Eastern Europe, which sparked wild price increases as those economies were freed. Now, as brokerage Dean Witter noted in a recent report, inflation worldwide has been suppressed by rising productivity, trade liberalization and governments’ fiscal restraint. The big question: Can it last?

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World Consumer Inflation:

1996: 7.6%

* Source: IMF