This article first appeared in Forum, The Edge Malaysia Weekly, on March 28 - April 3, 2016.

We have all been seduced by the fall in the oil price. Headline inflation figures have been held at low levels in most of the world’s major economies, and investors have been inclined to forget that prices can go up.

This process has been helped by a number of central banks that have chosen to take interest rates negative, giving the impression that inflation is a thing of the past and it is falling prices that should concern us.

Unfortunately, this complacency about consumer prices is ill-founded. Beneath the benign surface of headline inflation, some countries are experiencing rising inflation pressures. As the group of countries with increased inflation pressures now includes the US, investors have to pay attention to this.

Core inflation theoretically excludes food and energy prices from its calculation. In fact, it includes both food and energy, but indirectly (air fares are around 40% fuel costs, and air fares are included in most core inflation measures). Nonetheless, energy undoubtedly has a lower weight in core inflation, and this allows core inflation to better signal inflation pressures in an economy.

In over half the world’s major economies, core inflation rose over the course of 2015. Moreover, the way in which core inflation has risen is troubling. US core inflation has been rising steadily — there is nothing erratic to suggest temporary factors at work. Rather, the core inflation increase has been smooth and inexorable — a signal that the price pressure from a progressively tighter labour market is now coming through.

The rise in core inflation is a local issue. The correlation of core inflation between different economies is extremely low. That means that core inflation in one economy will be independent of core inflation in another economy. Rising core inflation in the US does not have to mean rising core inflation in Asia, for instance.

This is one of the key arguments against the idea that Asian exports unleashed a global disinflation force — if they had, then core inflation rates in different economies should be closely synchronised. They are not because (apart from commodity prices) inflation is a local issue, not a global issue.

Even if the rise in core inflation is locally determined, the consequences of this may be felt globally. The US Federal Reserve raised interest rates last year because it felt it had to raise rates in order to maintain price stability. In this, it was undoubtedly right, but the increase in US interest rates has had implications beyond the borders of the US.

This year, the US Federal Reserve is facing rising pricing power and rising inflation. The best possible outcome for the US in the medium term will be for the Fed to raise interest rates further.

We must not be beguiled by the low headline inflation rates. Inflation pressures are building in several economies. The moment oil prices stabilise, these underlying inflation pressures will reveal themselves. Central banks are readying themselves to deal with this. Investors need to be ready too.

Paul Donovan is senior global economist at UBS Investment Bank. His latest book, The Truth About Inflation, was published by Routledge in April 2015.

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