Breaking down inflation

The Office for National Statistics (ONS) has just published its latest bulletin on inflation.  There are a number of different inflation measures included – RPI, CPI and CPIH – but the overall conclusion is that inflation is slowly rising after a reduction at the start of the year.  The rate remains over 2%, which means the Bank of England must continue to plan on how to set its policy to reduce the figure, but since it has been over 2% since January 2017, and the main driver is Brexit, it’s unlikely the government is going to be too strict about this.

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The continuing relevance of the Phillips curve

The Phillips curve is an indication of the relationship between unemployment and inflation. The curve is named after AWH Phillips, who discovered the existence of this relationship when looking at UK data between the years 1861 and 1957. The curve shows that as unemployment rises, the rate of inflation can be observed to be lower, and vice versa. The relationship was similar for other developed countries.  Continue reading “The continuing relevance of the Phillips curve”