Energy shocks and inflation episodes in the UK

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This paper explores the potential macroeconomic impacts of the recent episode of global energy shock in the UK economy. Unlike the Great Inflation in the 1970s, current inflation is likely to have limited impacts on the overall UK economy due to institutional changes, such as the weakening of collective wage bargaining, etc. As a result, we argue that the current episode of inflation requires limited interventions using monetary policies. A new macro-econometric forecasting model is developed for the UK economy to simulate counterfactual policy scenarios.