There are a number of explanations for that. In the wheat market, it looks as if more Ukrainian grain will be available than was expected (even if some of it is smuggled on Russian-controlled ships). In other cases, soaring prices have already curbed demand, putting downward pressure on prices (there can’t be many of us who haven’t skipped a car journey or two over the last few weeks).
With the exception of European gas, its own weird little market, commodity prices are tumbling everywhere. Given that much of the spike in inflation was driven by raw material costs, that will start showing up in the indexes over the next three months.
Next, we have avoided a wage-price spiral. Average wage growth in the UK is running at 4pc which is roughly in line with its long-term averages. Sure, we are seeing some strikes, especially in the public sector, as workers try to keep up with surging prices, but unionisation rates are now so low it does not make much difference to the overall trend.
The hit to living standards is being taken by ordinary workers. True, that is painful. But the alternative is a lot worse. Once wages and prices get into a spiral, with higher salaries forcing firms to increase prices, and then forcing staff to ask for more money again, inflation gets out of control. Very quickly you end up at 20pc or 30pc. The increased flexibility of labor markets over the last 30 years means we have avoided that. And without surging wages, inflation can’t get a real grip.
Finally, the money supply has started to drop last. There are lots of different ways of measuring the supply of money, but if we take one the standard one – M4 for the purists – the rate of growth has dropped to a relatively stable 4pc in the year to April from an alarming 15pc at the end of 2020.
With the exception of the eurozone, the same is true in other major. Quantitative easing, which fueled record growth in the money supply has been wound up. Monetarism is out of fashion among central banks, and the relationship between the growth of the money supply and rising prices is seldom straightforward. Even so, it would be crazy to conclude that a drop of that magnitude would not have any impact on prices.
This week while everyone was paying attention to the drama in Westminster, the markets started pricing in the expectation that interest rates will fall in the UK by next year. The same is true on Wall Street, where traders have already concluded that by next year the Federal Reserve will be more worried about fighting a recession than curbing price rises. It may not feel like it when your contactless card swipes six quid for a coffee, or two quid for a tin of beans, but in reality the battle against inflation is already won. By this time next year, we will be wondering what all the fuss was about.