Fixed income investors can breathe easier as inflation recedes: Dale Jackson

This week’s tamer-than-expected U.S. inflation numbers are the latest signal that massive interest rate hikes over the past year are working to cool the economy.

As an example, a one-year guaranteed investment certificate (GIC) currently pays about five per cent while the year-over-year inflation rate in Canada stands at 4.3 per cent. It’s a vast improvement from last year when inflation topped eight per cent as yields on GICs languished at one per cent.

THE BEST OF A BAD SITUATION

Real returns aside, having a portion of retirement savings in fixed income is essential to balance overall portfolio risk against the volatility of equities. Any rate of return is welcome if stock markets tank when retirees need a reliable cash supply for living expenses.