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An Investor's Guide to Inflation


Prices are going up all over, but it's common practice among economists to cite only the "core" inflation rate, which excludes food and energy costs.

Of course, consumers can't ignore food and energy costs and neither should investors. While the overall consumer price index rose 4% over the past year, prices on many everyday items increased much faster, and more pain is expected. The Conference Board's April survey found consumer expectations for future inflation matched the all-time high set by consumers in the fall of 2005, after Hurricane Katrina.

The simplest antidote for investors is to buy U.S. Treasury Inflation-Protected Securities directly from the Treasury Dept. The bonds pay a below-market fixed rate of interest but get an added kicker every year equal to the rise in the CPI. Are you worried about the impact on your finances from the myriad items whose prices have risen more quickly than the overall CPI? Here's a typical day of sticker shocks, and how you can try to profit from them:

Pressman is a correspondent in BusinessWeek's Boston bureau.

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