Macroeconomics: UK economy, IB Economics

It seems as though the government are not looking to cut taxes any time soon - with inflation remaining stubbornly high and the government looking to get this under control. At this point in time, there's a trade-off: lower taxes are likely to increase aggregate demand and this might help stoke inflation. 

The Chancellor has pledged to tackle rising prices - by delivering "sound public finances". I'm not entirely certain I follow his chains of reasoning? 

Is he suggesting that the current inflation is caused by demand-pull factors, and how does this square with his previous pledges as Education Secretary to significantly increase teachers' pay?

And doesn't sound public finances smack of austerity? And what does it mean for the much vaunted "levelling up"? Lots of unknowns, or, dare I say it, incoherence here...

Phillip  Inman looks at the prospects for another rise in interest rates this month - with many forecasting that the Bank of England is going to increase rates to 0.75%.

However, he argues that the number of job vacancies, the effects of the rising costs of living and the absence of obvious upwards pressure on wages means that there's little evidence of the economy overheating, making a rate rise unnecessary. Yet again, you need to be clear about whether the causes of inflation are demand-pull or cost-push.

The IMF doubles down on its criticism of Kwasi Kwarteng's mini-Budget by suggesting that it will contribute to higher than expected inflation to the extent that Slovakia will be the only eurozone country with higher inflation. Their reasoning is that it will stoke demand-side pressure on prices - although the bulk of the inflationary pressure is cost-push. 

In addition, if that weren't enough - we're also on track for exceptionally weak growth next year too - of  0.3% - with only Italy and Germany expected to grow less than the UK. 

A pithy look at why UK inflation is the highest of all G7 nations - highlighting energy prices - and the structure of the industry - the impact of Brexit on the value of the pound and worker shortages. 

All of the above are causes of cost-push inflation. Are there any demand-pull factors that you can think of?

Phillip Inman plays down the risk of their being a sizeable pick-up in inflation next year - and I have to say that I agree with him. I don't see much demand-side pressure, and the notion of pent-up demand isn't consistent with what I'm seeing.

However, I do think that there are cost-push inflationary pressures, and I think that these are far from insignificant. The current shutting of ports might be a precursor to a no deal Brexit, and if, as Inman states, this means that our worn-our capital needs replacing, then this would suggest that we're not competitive in a world without tariffs. And a world with tariffs will increase the costs of trade,  not least the costs of importing high quality capital.