The mugger’s accomplice

‘Inflation,’ Ronald Reagan declared, ‘is as violent as a mugger.’ In response, the world pursued zero-tolerance policies for two decades, to the point at which politicians and central bankers began to believe they had actually eradicated the menace. When Gordon Brown used to boast that there would be ‘no more boom and bust’, he was relying in large part on a belief that inflation had been permanently defeated by monetary and fiscal prudence combined with globalised trade.

But now we know that inflation is on the loose again, and all the more frightening for being unfamiliar. The Consumer Price Index (CPI) stands at 3.8 per cent, a 16-year high and almost double the Bank of England’s target. And the CPI itself (which excludes housing costs, and includes in its basket a selection of consumer goods that no one needs to buy every week) is now exposed as a wholly inadequate indicator of the real rate at which household bills are rising.