The Monetary Policy Committee is considering whether to change Bank Rate. The inflation target is 2%. The latest figures and forecasts are shown below.
| Situation | Inflation rate | Unemployment rate |
|---|---|---|
| Latest figures | 5.0% | 6.2% |
| Bank Rate unchanged: forecast in 12 months | 4.4% | 5.8% |
| Bank Rate raised by 1 percentage point: forecast in 12 months | 3.0% | 6.5% |
Using the information in the table, explain why this creates a difficult decision for the Monetary Policy Committee.
116 exam-style questions on OCR GCSE Economics 3.6 Monetary policy, covering 3.6.1 What is monetary policy, 3.6.2 Monetary policy and macro objectives, and 3.6.3 Effects of monetary policy. Each one has a worked solution and a mark scheme showing where the marks go.