In the News

Why apologise for low inflation?

Penny Brooks

14th January 2015

CPI inflation has slipped well below the lower limit of the Monetary Policy Committee's target, to 0.5% - that is far lower than it fell during the recession, and the lowest level since May 2000. So, as Mark Carney prepares his letter to the Chancellor to explain how this has happened, and what the Bank of England intend to do about it, the BBC have published an article which examines why we need some inflation. It is one of those articles which is truly useful - probably more so than a text book as it is based on real, current context. Highly recommended to AS students learning about inflation for the first time, and A2 students who need to revise the basics.

Robert Peston takes this a bit further, in a blog which A2 students should certainly read, as it examines the risk of deflation, and whether 'benign' price falls in food and fuel might become 'growth-killing' deflation. Again, it is textbook stuff which is happening in real-time, and really useful background for students.

We have to wait to see Mark Carney's letter to the Chancellor, which will be published by the Bank of England alongside the February Inflation Report on 11 February. However, in the meantime, ITV's Economics Editor Richard Edgar has his own ideas of what it may look like -drafting Mark Carney's letter could be a tempting exercise for prep, this week!

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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