Chasing the curve

16 June 2008 By Ian Campbell

Rising inflation has created widespread expectation of higher rates. Real overnight interest rates, however, show the US to be much further behind the curve than the eurozone, while in the UK real policy is already quite tight and growth prospects quite poor.

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Inflation in the eurozone rose to a record 3.7% in May, the European Union's statistics office, Eurostat, revealed on June 16, rising from April's 3.3%. The socalled core rate of inflation, exclusing volatile items such as energy and food, rose to 1.7% from 1.6% in April.

US consumer prices were reported on June 13 to have risen by 0.6% in May from April and by 4.2% from May 2007. Socalled core inflation, excluding food and energy, rose by 0.2% in the month and by 2.3% yearonyear. Energy prices jumped by 4.4% during the month, and gasoline prices, by 5.7%.

The UK's annual inflation rate was 3.0% in April. The May rate will be released on June 17 and is expected to show an increase.

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