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Pill discusses extinsic versus intrinsic persistence

BOE

Pill says think about persistence in 2 different ways:

  • Extrinsic persistence: Inf peaks higher than you'd like for longer than you'd like because of persistent shocks. Think that does partly explain. Particularly with goods during lockdowns - UK is a price taker. Started to come off in early 2022. Then Russia invade Ukraine and that pushes up energy and food prices. Can be bad luck - but that's not all.
  • Intrinsic persistence: Also because inflation is high and people are worse off, workers look to boost wages, entrepreneur look to boost profit margins. So even when costs of goods / energy normalises, will have this persistence. This is where BOE's focus is. That is where the interaction between persistence and restrictiveness comes in.
  • Q&A ends.
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