Three Central Banks Made the Same Mistake in One Week

Oil hit $144 a barrel in April, the highest price ever paid for physical crude, and underlying inflation barely moved. This week, Neil Woodford explains why the oil price doesn't work the way most people think, and why three central banks tightened into a shock that was already reversing.

Jon and Neil mark Neil's December calls honestly (the wins and the misses), then get into the mechanics: why paper barrels set the price, not physical ones; the difference between headline and core inflation; and the base effects that mean the inflation number scaring central banks is about to fall on its own.

Then the mistake. The ECB raised rates the day before the peace process went public. The Bank of Japan gets Neil's sympathy as the one bank tightening into genuine wage inflation. And in Washington, new Fed chair Kevin Warsh has picked headline inflation as his fight; Neil takes the 4.2% apart and explains why the September hike never arrives, and why the Bank of England may cut before year-end.

Neil also names the one number that would prove the whole call wrong.