Inflation, long off the radar screens of money managers and investors alike, is a factor to be given some consideration in the current investment environment.

In fact, say managers at TAL Global Asset Management Inc., the economy is expanding, and inflation is sure to be a reality in the future.

Vincente Lepine, TAL’s vice president of global asset allocation, and Michel Jalbert, vice president of business development, told a workshop in Toronto Thursday the factors that influence Canadian inflation, its long-term trends, and its impact in different countries. The presentation to institutional investors also explained how inflation affects the financial situation of both pension plans and individual portfolios and offered solutions to protect against rising inflation rates.

Lepine says inflation has been on the decline in Canada since the 1980s. “We got used to this backdrop of falling inflation, so much that deflation became a concern,” he says.

These days, Lepine says the indicators or warning signs all point to a period of economic expansion and a subsequent rise in prices, especially for services. According to Statistics Canada data, services in fact, have never experienced episodes of deflation, and tend to be more “sticky” than the prices of goods. At the same time, he says the price of services rises faster than the price of goods.

Lepine maintains the easy monetary policies set out by the Federal Reserve and the Bank of Canada, stronger prices in the commodity markets, real estate prices and financial markets are all indicators or warning signs of upward pressure. Surveys of manufacturers such as the U.S. Institute of Supply Management Inflation Survey also indicate consumers are already paying higher prices.

“Traditional asset classes will not protect against the risk of inflation,” says Jalbert. He says hedged inflation indexed bonds are one remedy simply because they are structured to protect against inflationary risk, but deliver returns across a wide spectrum. Real estate and commodities were two other solutions he suggested for hedging against inflation.