Abstract
There is no doubt that the most encouraging aspect of Britain's economic performance in recent years has been the fall in inflation from a peak of over 20 per cent in June 1980 to a current rate of about 5 per cent. The speed at which inflation fell has taken many forecasters (including ourselves) by surprise. In this Economic Viewpoint we ask why the inflation rate has fallen. If we can understand why it has happened we are better placed to answer questions about the future. In particular we can try to decide whether the success in reducing inflation will be maintained and whether further cuts in inflation will be consistent with a fall in unemployment.
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