It is also important to monitor closely and respond to developments around the globe, as recent events have demonstrated that these can be rapidly transmitted across borders. In addition, monetary policy authorities need to work in collaboration with regulators and those responsible for financial stability to build their understanding of the financial system.
But the increase in other costs, such as the cost of capital or energy, is currently working in the opposite direction. Specifically, the unprecedented scale of pipeline pressures means that firms may choose not to pass lower real unit labour costs on to consumer prices to protect their profit margins from higher energy costs.