Current inflationary pressures have raised questions regarding the impact of rising prices on investment performance. The inherent characteristics of infrastructure make the asset class well-poised to weather such an environment.

Current inflationary environment

Following a global environment largely characterized by persistently low inflation and interest rates, the loose monetary policies, stimulative fiscal policies, and supply chain disruptions resulting from the COVID-19 pandemic have spurred the re-emergence of inflation around the globe. In January 2022, the U.S. consumer price index had increased 7.5 percent from the prior year — the largest increase since 1982. Further, in no previous period has inflation exceeded the Fed funds rate by a wider margin, which has resulted in severely negative real short-term interest rates. Additionally, central bankers are primed to hike rates in the near term as a means of combatting growing inflationary pressures.

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