How best can the UK reduce double-digit inflation?

We have added some updated videos covering policies to reduce inflation, the economics of the Phillips Curve and a video exploring the concept of the NAIRU to our reference section. Inflation and Unemployment are two super-important macro topics on the specification for 2023.

Whither inflation - and in this article whither inflation policy - this article looks at a number of measures that the Bank of England and government might take, including wage and price controls. However, it stops short of considering altering the inflation target. You might ask why it is that we have a 2% inflation target, and whether a 2.5% or 3% target might be more appropriate.

Please read: How can the UK tackle double-digit inflation?

A former member of the MPC, Michael Saunders, suggests that we're likely to see another interest rate rise in the current cycle, suggesting that rates might reach 4.5% in May as the Bank of England looks to choke off current inflation, Indeed, it seems that financial markets reckon that such a move is almost 100% certain.

Please read: Bank of England predicted to raise interest rates one more time in May

Policies to Reduce Inflation

In this updated video we look at the surge in UK inflation during 2021-23 and consider which policies might be effective in bringing down inflation without having too damaging an impact on other macroeconomic objectives.

Economics of the Phillips Curve

The Phillips Curve is a model that suggests there is a potential trade-off between improving the outcome for both prices and jobs. We explore these ideas in this revision video.

Economics of the NAIRU

NAIRU stands for Non-Accelerating Inflation Rate of Unemployment. It is the level of unemployment below which the rate of inflation might be expected to accelerate significantly.

Quizlet revision activity on inflation