The Bank of England is taking risks with inflation. Its policy has increased the monetary base and this will eventually feed into increased money growth as the economy recovers. Interest rate doves...

The Bank of England is taking risks with inflation. Its policy has increased the monetary base and this will eventually feed into increased money growth as the economy recovers. Interest rate doves believe that the UK can grow without inflation because there is a sizeable output gap, but as the output gap shrinks banks will increase lending and drive up inflation. The soft patch in growth in 2011–2012 has not changed the dynamics off inflation, just simply delayed it.

Source:
Daily Telegraph,
27 August 2013

1 Explain how the increase in the monetary base might influence (a) the short-run unemployment–inflation trade-off and (b) the long-run unemployment–inflation trade-off. Will the influence come from changes in the expected inflation rate, the natural unemployment rate or both?

2 Explain what the news clip means when it states that the ‘soft patch’ in growth has only delayed the dynamics of inflation.