Britain's inflation 'problem' isn't as unusual as you think

Received wisdom has it that Britain's inflation is unusually high when compared to other countries. But is that really the case?

We constantly hear about how the UK is an outlier in the West when it comes to inflation. While our CPI is running at 3.7%, prices are barely budging in other countries the US in particular. That's grist to the mill of the deflationists (whose cause we have enormous sympathy with).

But is it really so? Perhaps not.

In fact, according to Simon Ward at Henderson Global Investors, US inflation might not be so low after all. Recalculate it using the European Union's "harmonised index of consumer prices (HICP)" methodology and it turns out that US consumer price inflation is almost the same as UK consumer price inflation an annual 3.5% in April. US core inflation (excluding food and energy) would also be much higher using the European method 2% not 0.9%.

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You can argue the toss on the methodology with this one but it is worth noting that on the same method, Eurozone CPI comes in at about 1.5% that's a significant difference. So why might inflation be more obvious and so very similar in the US and UK than in Europe?

Presumably because both of them have followed very similar monetary policies since the beginning of the financial crisis lots of QE (money printing) and the tolerance of weak currencies. Something for both the inflationists and the deflationists to ponder over.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.