Everyone feels the effects of high inflation.

The world's major central banks are well aware of the dangers and are responding to the tense environment with monetary policy, some with significant interest rate increases.

However, economists are increasingly warning that high inflation could not just be a temporary phenomenon.

Only on Tuesday did the Federal Statistical Office announce that the inflation rate in Germany rose to an estimated 7.9 percent in August, after 7.5 percent in July.

With that, the short phase of calming down is over.

In addition, one can guess what consumers or investors could expect in the coming months, for example, if fuel discounts or 9-euro tickets have so far dampened the upward trend in prices in this country.

In the euro area, inflation has recently even risen to a provisional 9.1 percent, after 8.

Kerstin Papon

Editor in Business.

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From an investor's perspective, rising interest rates are actually good news.

In fact, there is not much reason to be happy: high inflation is currently making real interest rates significantly negative.

As interest rates rise, bonds fall in price and thus in value.

It is always important to consider the total return on a bond as a combination of earnings and price return, says Peter Becker, investment specialist at the asset manager Capital Group.

The yield is known.

It emerges from the coupon.

The price return, on the other hand, is derived from market movements and is unknown.

In most cases, the following applies: the slower the rise in interest rates, the more income fixed-income investments can generate in order to offset the loss caused by rising interest rates, says Becker.

Historical development suggests that investments such as high-quality, investment-grade global corporate bonds could generate an average annualized return of 4% to 5% over the next five years.

Riskier high-yield and emerging market bonds could provide a potential return of 9-10%.

Investment-grade and high-yield corporate stocks have historically delivered relatively consistent positive calendar-year returns, although the coupon may be a first line of defense.

However, the markets are likely to be characterized by uncertainty for the foreseeable future, such as the level of inflation, the risk of a recession, monetary policy, the growth prospects in China or the conflict in Ukraine, says Becker.

Price volatility should remain high into 2023.

However, some of the additional risk is already priced in through the higher yields.

In such an environment, it is prudent for investors to adopt an approach that is flexible, diversified in terms of risk factors and focused on what is currently known.

Asset manager MFS Investment Management thinks bond valuations are attractive after the recent rise in yields and spreads, especially with longer investment horizons.

It could be interesting for strategic investors to increase the bond allocation.