The UK's inflation performance appears to compare unfavourably with the US – "official" consumer price indices rose by 3.7% and 2.2% respectively in the year to April. The gap, however, largely disappears if US inflation is recalculated using the European Union's "harmonized index of consumer prices" (HICP) methodology. US HICP inflation was an annual 3.5% in April.

The US figure comes from a table of international HICP inflation rates published each month by the US Bureau of Labor Statistics. The UK and US April annual rates of 3.7% and 3.5% compare with 1.5% in the Eurozone and -1.4% in Japan. Similar UK and US inflation experience could reflect identical monetary policy strategies, involving large-scale "quantitative easing" and currency depreciation.

A key difference between the official US consumer price index (CPI) and the HICP is that the latter excludes owner-occupied housing costs, of which the most important component is "owners' equivalent rent" (OER) – a notional payment by homeowners to themselves for accommodation. OER has a 25% weight in the CPI basket and is estimated – based on market rents – to have fallen over the last year, exerting a major drag on official inflation measures.

It is debatable whether OER, involving no cash transaction, should be a component of the CPI basket. An implication of its inclusion is that homeowners' financial position has improved as a result of the recent decline in rents, even though this fall is a lagged consequence of a housing market slump that has slashed the value of their properties – by 32% from peak to trough according to the Case-Shiller house price index.

US "core" inflation (i.e. excluding food and energy) would also be significantly higher using the HICP methodology. A back-of-the-envelope calculation based on the CPI / HICP inflation gap adjusting for the larger weight of OER (32%) in the core basket suggests an April annual rate of about 2% versus an official 0.9%.

The lower official measure, heavily reliant on OER weakness, is helping the Federal Reserve to justify sustaining its super-loose monetary stance and encouraging claims that the US stands on the brink of deflation. The Fed would face a tougher task if required, like the Bank of England, to evaluate inflation performance using the HICP.