CPI took a rapid jump down in March in Europe and now sits at 2.4 per cent, whilst the UK still waits with it currently at 3.4 per cent. Debate as to whether the Federal Reserve ought to adjust interest rates remains strong. However, with US inflation sitting at 3.5 per cent, up from 3.2 per cent, it seems unclear why anyone might try to bring the fed funds rate down from 5.50 per cent at the moment.

Nevertheless, if we look at the average interest rates in each country or region above over the last 12 months, they are higher than the 12 months to date of those accumulating to the month prior. Both interest rates and CPI can each be measured monthly, but also annually in arrears, which sets a benchmark for how effective a backlog can be.

Currently, inflation is rather exposed and relatively fragile, as the pendulum sways from the one extreme of high interest rates and it being stubbornly stuck to this backlog of interest rates cumulatively trying to drive it down.

We are all straggling in the third quarter of a four-quarter race against inflation, not too dissimilar from a 200m freestyle race, and this third 50m is definitely the most challenging to crack. If we raise interest rates too high, we will risk a housing market crash in some countries and an increased cost of living crisis in others; yet, if we put them down too early, then we will risk inflation and contagion overtaking us.

The latter looks bleak and involves far too much of all previous efforts being wasted, in addition to a lot of the taxpayer’s money being spent without purpose.

On the plus side, EU/USD exchange rate is still looking fairly strong, so the US could absorb some of the Eurozone’s inflation drop and, hopefully soon, their interest rate decreases.

The Federal Reserve could leave the Fed Funds Rate where it is for a couple of months and allow the US to let Europe assist with bringing inflation down, then start to bring it down in three months or in Q3. In such a manner, currency hedging can be incorporated into trade to absorb inflation, in what could be a win-win situation.

Whilst inflation can eat away at debt, it is certainly the lazy option and it is wasting time. Indeed, interest rates can also quickly outweigh this minor advantage for the majority and in this sense can actually contribute to inflation by contributing to a drop in productivity, as a result of businesses being compromised.

If inflation drops down to sub-3 per cent and interest rates in the US are reduced in perhaps 3 months from now, then they undoubtedly could be dropped 0.25bp without the risk of much harm. Again, their average over 12 months would still be higher than it is today, which would have the necessary positive net effect. Data and situation-depending, things could easily be re-evaluated from here.

Eubulides of Miletus’ sorites paradox may be part of the solution or problem we face in this seemingly stuck state, yet optimism counts for over half of economics and control can wash away at progress.