“The Emperor’s New Clothes”, Hans Christian Andersen’s fairy tale about the fear of challenging mass delusion, is a story with resonance today.

Nowhere in economic debate does such power of perception play a bigger role than in the alleged disappearance of inflation. Central banks have switched the focus of public and media attention away from the full set of “consumer prices” to a subset that excludes some of the fastest-increasing items and therefore understates the true rate of price increases. The Federal Reserve, for example, focuses on “core inflation” – which excludes food and energy.