MPC inflation doves argue that slower core trends in other countries support the view that the "Phillips curve" is still working. According to the June minutes, "the recent downward trends in inflation, excluding energy and food, in the United States and euro area suggested that a substantial margin of spare capacity would cause inflation to fall back in the United Kingdom too, as the impact of temporary factors wore off."

This argument, however, assumes that the observed falls in US and eurozone inflation have been caused by spare capacity. A closer examination suggests otherwise.

In the US, the annual increase in consumer prices excluding food and energy has fallen from a peak of 2.5% in August 2008 to 0.9% by June. This mainly reflects a slowdown in the "shelter" component, which has a 42% weighting in the core index. Annual inflation excluding food, energy and shelter has fallen only from 2.7% to 2.1% over this period, remaining above its average in recent years – see first chart.

The shelter component is dominated by "owners' equivalent rent" – a theoretical sum paid by home-owners to themselves in return for accommodation. Its annual rate of change has fallen from 2.5% in August 2008 to -0.2% by June, a lagged reflection of housing market weakness. It is debatable whether imputed rent should be included in a cost of living index – it is omitted from UK and eurozone indices. In any event, the decline in US shelter inflation cannot be attributed to "spare capacity" in the sense of underutilised plant and machinery or labour.

Doves retort that housing weakness cannot explain the similar slowdown in eurozone core inflation (i.e. based on the consumer price index excluding unprocessed food and energy) from an annual 2.6% to 0.9% between August 2008 and June. This decline, however, owed much to a 17% rise in the euro's effective exchange rate in the three years to July 2008 – second chart. The 12% fall in the euro since last October may be starting to lift core inflation, which bottomed at 0.75% in April.

The "big picture" is that global core inflation has proved much stickier than predicted by Keynesian models based on the large decline in output during the "great recession".