Telegraph.co.uk- Hedge funds have suffered major losses after wrongly betting that market inflation expectations would fall, the Bank of England has said.
The Bank reported that many hedge funds had been badly burnt after market expectations for inflation rose to a new high, most recently hitting 4pc for the first time since 1997.
So significant were the funds’ bets that they actually distorted the so-called “breakevens” rate – which represents the average level of inflation investors expect over a certain period – pushing it up sharply in the months up to May.
