In almost every corner of the world inflation is uncomfortably high, creating a giant headache for policymakers as they grapple with the threat to growth from the turmoil in global credit markets.

The concern about inflation would swiftly disappear if the US plunged into a deep recession, as investors increasingly fear. But for now, the dilemma is all too real. In October consumer prices rose at an annual rate of 3.5 per cent in the US, 2.1 per cent in the UK and 2.6 per cent in the eurozone – where November showed a jump to 3 per cent. German inflation is at its highest in more than a decade.