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Box A: Underlying Inflation in the United Kingdom

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  • Paul Mortimer-Lee
  • Paula Bejarano Carbo

Abstract

Inflation is a sustained rise in the general price level. It matters because a high rate of inflation can reduce the real purchasing power of money and fixed incomes and can make relative price movements difficult to spot. It can distort resource allocation and intrude into wage and price setting behaviour, as well as having an important influence on interest rates. Knowing the 'true' underlying trend rate of inflation is important for decisions by the Bank of England in setting interest rates because monetary policy shouldn't respond to volatile or transitory changes.

Suggested Citation

  • Paul Mortimer-Lee & Paula Bejarano Carbo, 2023. "Box A: Underlying Inflation in the United Kingdom," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 11, pages 12-19.
    • Handle: RePEc:nsr:niesra:i:11:y:2023:p:12-19
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    File URL: https://www.niesr.ac.uk/wp-content/uploads/2023/08/JC737-NIESR-Outlook-Summer-2023-UK-v10-AC.pdf?ver=UPKR6WzhPpwqRCGH7J0A
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    References listed on IDEAS

    as
    1. Hanazaki, Masaharu & Horiuchi, Akiyoshi, 2003. "A review of Japan's bank crisis from the governance perspective," Pacific-Basin Finance Journal, Elsevier, vol. 11(3), pages 305-325, July.
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