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IMF alert on inflation

The International Monetary Fund is warning central banks to stay focussed on inflation despite pressure to lower base rates.

In an article that analyses the impact of sub-prime woes on the economy, Dominique Strauss-Kahn, managing director of the IMF, says governments must stay on task if growth is to flourish in the medium term.

He says: “Inflation has risen to its highest levels in more than a decade in developed and emerging countries.

“Fiscal, monetary and exchange rate policies must respond expeditiously to the increasing inflation risks. Failure to do so could undermine medium-term growth and poverty reduction efforts.”

His remarks follow inflationary highs, with the Consumer Price Index reporting inflation at 4.7% – 2.7% off the target set by the Monetary Policy Committee.

The Bank of England refused to comment.

But in a letter to chanmervyn kinginflation still the prioritycellor Alistair Darling, BoE governor Mervyn King says: “Painful experience has shown that if we allow an increase in inflation to become embedded in expectation, a prolonged period of depressed activity and high unemployment is ultimately required to get inflation back down.”

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Apple: a stellar technology story

By Ali Unwin, head of technology sector research

Apple recently announced the highest-ever recorded quarterly net profit ($18bn), with the sale of 74.4 million iPhones helping the company deliver $74.6bn of revenue for the quarter ending December 2014. These sales were largely driven by strong demand for the new iPhone 6 and iPhone 6 Plus. Highlights included Chinese iPhone sales doubling year-on-year and unit growth of 44% in the US — supposedly a well-penetrated market. Apple ended the quarter with $178bn in cash on its balance sheet, having generated a staggering $30bn in free cash flow during the quarter.

At Neptune, we have been long-term believers in the Apple story, and continue to hold the stock in a number of our portfolios based on the company’s long-term growth prospects. This is predicated on our belief that Apple has proved thus far that it can — unusually for a consumer electronics company — maintain high margins for a sustained period of time, even as adoption of new technology slows down and competitors produce similar-specification products.

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