What accounts for the difference in inflation paths in the UK and the US? In America, we have disinflation, causing the Federal Reserve to conduct a second round of quantitative easing. But in the UK, we have accelerating inflation. Policymakers will say they don’t want this because of the squeeze on households. But, clearly it helps diminish the real value of debt. In my view, that won’t help much if real wages aren’t keeping pace.
(CNBC video discussing the inflation issue below)
Update: Note that just after I posted this, annual US core inflation came in at 0.6%, the lowest on record. See the Reuters story here.