First, the good news. Inflation is heading lower. US inflation peaked at 8.5 per cent late last year and is now running at around five per cent. Eurozone inflation peaked at 10.6 per cent and is now down to 6.1 per cent. UK inflation peaked at more than 11 per cent and has dropped to 8.7 per cent.
Second, the not so good news. Although inflation in all three economies is lower than it was, prices are still rising too quickly. Remember, the Federal Reserve, the European Central Bank and the Bank of England are supposed to bring inflation back down to two per cent and, generally speaking, keep it there. As yet, not one of these central banks is close, one reason why financial markets think interest rates may still be heading higher.
