The UK Government Response to Inflation: BM461 Report

This report examines the UK government's response to rising inflation within the economy, focusing on the policies adopted to control it. The report begins with an introduction to inflation and its impact, followed by an overview of the assignment's task, which is to assess the UK government's actions. It analyzes various strategies, including monetary and fiscal policies, and supply-side policies. The report highlights the effectiveness of monetary policy, specifically changes in interest rates, as a key tool for managing inflation. It also discusses how fiscal policies and supply-side measures contribute to economic stability. The conclusion emphasizes the importance of controlling inflation for overall economic stability. The report is supported by references to academic journals and books, providing a comprehensive analysis of the topic.

Report

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
‘The UK Government Response to the Rise of Inflation within the Economy.’....................1
Some measures of success that you expect to see within the economy as a result of these
policies:.......................................................................................................................................1
You should choose one government policy to focus upon only..............................................2
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Inflation is the rate through which the prices of the goods and the services rise for the some
period of time which enhances the cost of living. There is major requirement to control it for
stability in the nation (Rae, 2022). The aim of this report is to highlight the policies to control
inflation by the government of UK.
TASK
‘The UK Government Response to the Rise of Inflation within the Economy.’
Different countries adopting different measures and strategies in respect to control the
inflation. The major reason behind it is that reduction in inflation brings pricing stability and
provide long term goal for the effective monetary policy. There are multiple measures that UK
government adopts to fight the inflation and the main strategy is setting monetary policy.
 Setting effective monetary policy- UK government implements the tool which is
effective to keep inflation stable and low. The impactful way of this is through the
interest rates (Zaremba, Umar and Mikutowski, 2019). Interest rate is amount of money
people of UK get on their savings. It is also the amount charge on the loans and the
mortgages.
 Tight fiscal policies- UK government implements higher income tax and reduce the
government spendings , which as a result make reduction in the aggregate demand. Leads
towards lower growth and less demands of the goods pull back inflation.
 Supply-side policies- The main aim behind this policies is to enhance the long term
competitiveness, as UK government leads towards privatisation and the deregulation
which helps in reducing the cost of the business. And as an outcome it leads to lower the
inflation rate.

Some measures of success that you expect to see within the economy as a result of these
policies:
 With the help of the monetary policies UK government turns the interest rates high and
this restrict the money supply in the market of the UK. Lower the money supply make
reduction of the prices of the goods and services which lowers the inflation rate.
 Fiscal policies are related to the taxes and the government spendings if the rate of the
taxes raise and the government of the UK diminish its spendings then there is reduction
of the money flow in the market which is very helps to lowers down the inflation rate.
You should choose one government policy to focus upon only
The policy which is very effective in dealing with the rise in inflation is Making changes in the
monetary policies. Charging higher interest on the loans and mortgage and providing lower
interest on the savings. This influence the inflation more in the UK in comparison to other
strategies.
CONCLUSION
From the above report it is concluded that controlling inflation is very important for achieving
stability in the economy . UK government adopting different strategies for tackling it such as
effective monetary policy, Tight fiscal policies and Supply-side policies. But the most impactful
is changing monetary policies and the interest rates.

REFERENCES
Books and Journals
Rae, M., 2022. Protection From Inflation: Examining UK Inflation Measures. In SAGE Business
Cases. SAGE Publications: SAGE Business Cases Originals.
Zaremba, A., Umar, Z. and Mikutowski, M., 2019. Inflation hedging with commodities: A
wavelet analysis of seven centuries worth of data. Economics Letters, 181, pp.90-94.