Headline acts?
Dall’Angelo says the risk is that the impact of the war in Ukraine and exit from the pandemic restrictions cause a structural change in the level of inflation in the economy.
But Keith Wade, chief economist at Schroders, says we may already have the answer to that quandary.
He calculates that only around a quarter of the higher inflation we are seeing is from energy and food costs, with the rest coming from the factors that impact core inflation.
The impact of this may already be felt, with the latest UK GDP numbers showing the economy contracted in March, and in the US data showed it contracted in the first quarter of this year.
The picture in the UK is broadly similar to the rest of the world; headline inflation is actually higher in the US and Eurozone than in the UK, this may be because the US sent cheques to people during the pandemic, so the level of savings among households may be higher.
In the Eurozone, the pandemic restrictions continued for a longer period of time than in the UK, so its economies are at an earlier stage of the re-opening cycle.
But the differences between the headline inflation levels in the three regions is quite small, and it will be the core inflation number that determines the path of monetary policy, and possibly economic growth, in the months and years to come.
David Thorpe is special projects editor of FTAdviser
