Over half of high net worth individuals are concerned about rising inflation in 2011, according to a new study byTowry, the UK-based financial advisory firm.

In a survey of 246 of its clients, Towry found that 59 per cent of them were worried about rising inflation over the next 12 months. The issue is central to wealth managers, as inflation erodes wealth if it is invested in monetary assets, and bonds have been a very popular investment since the crisis.

“Although inflation in developed economies may be subdued for some time it is likely that inflation will increase in the future. This is because central banks in the developed economies will be encouraged by their governments to have an accommodative monetary policy for longer than they would like in order to reduce employment,” said Dr Robert Dawkins, chief investment officer at Towry.

“To protect against inflation, investors may consider moving away from bonds and towards hard assets such as real estate and commodities,” he added.

Finance professionals and economists have been split over their inflation expectations since the financial crisis, with many arguing that rising inflation is an inevitable consequence of the lax monetary policy in the West, and others arguing that deflationary pressures such as deleveraging are the biggest spectre to the economy.

However, according to the latest figures, UK Consumer Price Index annual inflation was running at 3.3 per cent in November, and Retail Price Index annual inflation – which measures a different basket of goods and is devised using a different methodology – is running at 4.7 per cent. Both measures are well above the Bank of England’s 2 per cent target (for CPI inflation), something which has caused concern as it is deviating from its central objective of achieving price stability. This is problematic because if trust in the Bank is eroded, people’s inflation expectations rise, something which in itself can accelerate inflation.