Why it's time to take the inflation threat seriously

Headline inflation is enjoying some relief at the moment. But exploding food prices and the threat of $100 oil mean any celebration would be premature.

There is no question that headline inflation in many parts of the world is currently enjoying some relief as the effect of rising energy prices a couple of years ago finally seems to have been washed out of the system. In this month's letter we will take a closer look at inflation and why it may be premature to celebrate. Let's begin by looking at how headline inflation in the EU has developed in recent years:

Chart 1: Harmonised index of consumer prices

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