News from the US yesterday may be telling us that US inflation is set to surge, leading to much higher interest rates, which will eventually kick off higher rates in the UK too, creating a quite new economic environment.

US inflation rose to 2.5 per cent in January, the highest level in five years. But then inflation is rising worldwide at the moment, thanks largely to increasing commodity prices. The jump in US inflation was not unexpected.

When the US Federal Reserve sets interest rates, it tends to pay little attention to the headline inflation rate, after-all it can do little about commodity prices. Instead, it focuses on core inflation, or inflation with food and energy taken out.

US core inflation rose to 2.3 per cent in January – that was the highest level for a few months, but actually was not that serious. In fact, US core inflation has been fluctuating between two and 2.3 per cent for over a year.

It is true that the headline rate has been rising, but so far, the core inflation rate, the one that matters, is like Arthur Conan Doyle’s dog that didn’t bark.

We can say ditto for Europe, and China. In China, producer prices are rising very rapidly, in the UK and Eurozone the headline rate of inflation has been rising rapidly. But core inflation is leaping like a tortoise doing the high jump.

But this time around there was something different, something that is a little more significant emanating from the US. US core inflation rose 0.3 per cent on the month before.

On its own, this may not be too dramatic a shift. It’s not the first-time month on month core inflation has been at that level in the last year or so. But it does rather fit into the narrative of rising inflation. If monthly core inflation stays at that level, then it won’t be long before the annual rate rises much higher.

We can be pretty sure that US interest rates are going to rise this year. In due course, this will probably mean that UK rates will rise, too.

But if US core inflation does start to rise too, then the Fed may review its current thinking, and increase interest rates at a much higher rate than is currently being anticipated.

Bear in mind that Trumponomics should be inflationary. Inflationary policy at a time when prices are rising at a very slow pace is good. Inflationary pressure at a time when prices are in any case rising, may lead to something more serious.

There is a precedent for this. In the UK during the 1970s, under the Ted Heath government, a policy known as ‘rush for growth’ was applied. The idea was to work with the economic grain, rather than try and boost the economy when it was slowing, boost it when it was growing anyway. The eventual result was one of the biggest economic crises in the UK’s history.