Bond ETF Investors Can Hedge Inflation With TIPS | ETF Trends

The European Union is now faced with rising inflation. Investors may hedge against the potential harm of rising inflation to a government bond through Treasury-inflation protected security (TIPS) exchange traded funds (ETFs).

Eurozone inflation for March was a higher-than-expected 2.6% year-over-year, beating a projected 2.3% rise, which could push the ECB to raise the bank’s key rate at its next April 7 meeting, writes Gregory White for BusinessInsider.

ECB policymakers have hinted that the central bank could raise its main interest rate by a quarter of a percentage point from 1%. Many economists blame rising energy costs as a major contributing factor. [TIPS ETFs: Give ‘Em Some Time.]

The surge in inflation has fueled speculation of multiple interest rate hikes to cool the economy, reports Brian Blackstone for The Wall Street Journal. Meanwhile, the euro gained on the news since higher interest rates bolster a currency’s value and the U.S. Federal Reserve isn’t expected to start rate hikes for at least a few more months. [Using TIPS ETFs in Retirement.]

Some economists now project inflation rates close to 3% by summer, above the ECB’s target of below 2% over the medium term. For the last three months, inflation has risen almost 5% at an annualized rate.

Meanwhile, Germany, the region’s largest economy, reported another drop in unemployment, according to Ralph Atkins and Quentin Peel for Financial Times. German data revealed that unemployment dropped twice as fast as previously expected in March. The jobless rate is at 7.1%, the lowest since German unification in 1990.