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Originally Published: Aug 13, 2020
Originally Published: Aug 13, 2020 Last Updated: Aug 12, 2020 8 min read

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Mark Wang for Money

As if we didn’t have enough to worry about in 2020, it looks like many investors are now worried about inflation too.

That's according to a key bond market indicator, known as the TIPS spread, which measures the price difference between inflation-adjusted and plain-vanilla Treasuries. And although experts aren’t saying that inflation is right around the corner, with the country’s increased debt — which has ballooned during the pandemic — it makes sense that it’s on people’s minds.

“It is something that you cannot ignore,” says Matthew McKay, investment analyst at Briaud Financial Advisors. “It’s something that I think about every single day.”

That’s because an inflationary period can last a decade (think of the 1970s). And while during a recession, investors are worried about protecting their principal, in an inflationary environment they have an additional goal: maintaining purchasing power.

On Thursday, things got still more complicated for investors, when Fed Chair Jerome Powell announced a change, what he calls a new “flexible form of average inflation targeting.”

While the Fed previously targeted a rate of 2% inflation, it will now allow inflation to run “moderately above” 2% after periods of time when it has been below, so long as the long-term rate averages out to around 2%.