Inflation looks high in the United States, but is actually low; inflation looks low in the euro zone, but is actually high

Headline inflation (which was 3.2% in February 2024 in the United States), inflation excluding energy and food (which was 3.8% in February 2024 in the United States) and the rise in the price of services excluding rents (actual and imputed to homeowners, which was 3.9% in February 2024, again in the United States, compared with 2.8% in September 2023) seem high and are no longer falling. However, when we strip out rent imputed to homeowners, we find that inflation excluding energy, food and imputed rent is only 2.7%. Inflation in the United States therefore appears to be high, but in reality it is low, since rents imputed to homeowners are not a real spending item and have no impact on purchasing power. In the euro zone, headline inflation was just 2.6% in February 2024, inflation excluding energy and unprocessed food was 3.3% (compared with 3.6% in January 2024), and the rise in services prices was 4%, again in February 2024, compared with 4% in January 2024. Headline inflation in the euro zone therefore appears to be low, but when we adjust for the fall in energy prices (which fell by 3.7% in February 2024), we see that it is still quite high, between 3.3% and 3.9% depending on the definition used.