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Inflation has fallen a long way from its peak - but many people still feel worse off, and price rises have remained stubbornly above the Bank of England’s 2% target. So what actually caused the big inflation spike, how close are we to “normal”, and what does that mean for households?
Helen is joined by David Miles (OBR and former member of the Bank of England’s Monetary Policy Committee) and Peter Levell (IFS) to break down the basics: what inflation is, why central banks target 2% rather than 0%, and what drove prices up so sharply in recent years.
We also dig into who inflation hits hardest, how much of the cost-of-living crisis is really about inflation, and why the Bank raises interest rates even though it can make life feel tougher in the short run.
Zooming in discussion questions:
These are a set of questions designed for A Level economics students to discuss, written by teacher Will Haines.
- Why does the Bank of England set an inflation target of 2% instead of 0%?
- What factors contributed to the rise in inflation in the UK economy following the Covid-19 pandemic?
- What policy options are available to manage an economy experiencing above-target inflation alongside slow economic growth?
Host
Helen Miller
Helen joined the IFS in 2007. She has almost two decades of experience analysing UK fiscal policy and providing trusted advice to policymakers.
Participants
Peter Levell
Peter joined in 2009. He has published several papers on the microeconomics of household spending and labour supply decisions over the life-cycle.
Professor David Miles
David Miles is a member of the Budget Responsibility Committee at the OBR. He also holds a part-time Professorship of Financial Economics at Imperial College, London. He has had previous academic positions at Birkbeck College, London and at Oxford University. He has undergraduate and masters degrees from Oxford University and a PhD from the University of London.
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