Economic recovery and interest rate and commodity price rises will spur wage-push inflation of up to 5% in the US and the UK, according to international asset management firm Managing Partners Group.
MPG predicts lower inflation of between 2.5% to 3.0% in the Eurozone in 2017.
Jeremy Leach, Chief Executive officer at MPG, anticipates that inflation will rise in the UK as a result of a robust economy, house price and rental increases and creeping mortgage rates resulting from a higher bank base rate towards the end of the year.
The Bank of England's MPC expects inflation to rise to the 2% target in the first half of 2017 - quicker than expected - after rising to 1.2% in November.
Industry experts now believe that racing inflation figures will put pressure on the Bank of England to raise rates sooner.
Commenting on inflation in the US, Leach said: “Reflation is expected to be a strong theme in the US in President Trump’s first year and the Fed rate will likely rise in response to 1.25% by the end of 2017. While inflation is usually viewed as the nemesis of central banks, it will actually be a welcome solution for reducing the real value of the enormous debt in Europe.”
However he says it is likely that that there will be a "significant event in 2017 that will knock markets", either an economic event or maybe a shock from the elections in Germany, France and the Netherlands.
As a result, MPG predicts that short-term debt and asset-backed securities offering 5-6% over three to five-year terms will be attractive "because of the inflation-proof returns that they offer”.
MPG believes the market for asset-backed securities is "set to grow exponentially" over the next few years in Europe to meet demand from companies in three main sectors - SMEs looking to expand their products and services, operators in the growing FinTech sector and alternative fund managers looking to raise extra capital without creating new shares or units in their products.