These Times

The Politics of Inflation

14 snips
Jun 26, 2023
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INSIGHT

Pandemic Recovery Sparks Inflation

  • Inflation rose above the Bank of England's 2% target in mid-2021 due to the pandemic recovery and supply shocks, particularly in energy.
  • The Bank of England initially ignored inflation and only began tightening interest rates in early 2022 after inflation accelerated.
INSIGHT

Brexit's Hidden Inflation Effect

  • Brexit removed a key anti-inflationary constraint by ending freedom of movement within the EU, impacting the labor market.
  • This change contributed to inflationary pressure by loosening wage discipline previously enforced by immigration policies.
INSIGHT

Monetary Policy's Limits Exposed

  • Global geopolitical shifts and energy shocks make inflation multifaceted and beyond the Bank of England's sole control.
  • Monetary policy, mainly raising interest rates, is a blunt tool affecting only homeowners, limiting effectiveness against inflation.
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