Cost-pushinflation can lead to a decrease in economic growth and often causes a fall inliving standards, therefore the government needs to take measures to strengthenconfidence in UK which should improve the value of the currency. The governmentcould pursue deflationary fiscal policy (higher taxes, lower governmentspending) or deflationary monetary policy (increase interest rates and reducethe money supply), which could eventually reduce consumer spending andinvestment. However, this will lower disposable income even more. A long-termsolution to cost-push inflation could be supply side policies, which help toincrease productivity and shift the AS curve to the right.
Shifting the AScurve to the right would cause a lower price level, and by making the economymore efficient these supply side policies would help to reduce cost-pushinflation. Examples for such policies are free market supply side policies suchas lower income tax rates, and interventionist supply side policies such ashigher government spending. However, these policies would not reduce importcost push inflation instantly, it would take time to take effect.