It wasn't that long ago that inflation was a major threat to equity markets; predictions of a surge in prices resulting from massive injections of capital into financial markets sent investors in search of tools to protect against spiking CPI. Those concerns have largely disappeared in recent months, with deflation emerging as a more immediate threat to a still-fragile economic recovery [see also ETF Ideas For Deflation Defense]. That can be a tricky phenomenon to combat. "We know what to do with inflation when it rises," said former Fed Chair Alan Greenspan recently. "The committee has taken action to counter it many times and has succeeded in doing so many times. We haven't confronted the problem of potential deflation in a very long time."

While runaway inflation in the short term seems highly unlikely, many investors are still worried about the long term ramifications of recent stimulus measures. Today the annual Fed symposium will be taking place in Jackson Hole, Wyoming, with Fed chairman Ben Bernanke expected to comment on the current state of the economy, and how the Fed plans to move forward to ensure economic stability. While no one is sure of what Bernanke will say, it seems likely that recent developments in the housing market will get a mention. In addition, investors will be parsing Bernanke's words in an effort to glean any information that may shed light on future economic policies.

In light of this major Fed meeting, the iShares Barclays TIPS Bond Fund (NYSE: TIP) should be active in Friday trading. The fund offers exposure to inflation protected Treasuries, one of the most popular options for protecting against inflation. If investors get the sense that the Fed is legitimately concerned about deflation, TIP could continue to lose ground. But is it seems likely that more capital injections are coming, anxiety over inflation could begin to pop up again [see also 2010: Year Of The Bond ETF].

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