Central Bank Of England's Monetary Policy

2018 Words May 13th, 2015 9 Pages
Approximately every month the Bank of England’s monetary Policy Committee (MPC) meets in order to set the Bank Rate. The changes in the interest rates play a fundamental role in the economy of the country, therefore the results of this meeting are highly anticipated. However, In order to comprehend what possible effects a potential raise in the interest rates will have in the UK economy, it is crucial to elaborate on the process known as monetary policy. In few words, monetary policy is the procedure when the monetary authority of a country controls the supply of money, in a way that there is stability in the currency. The government has to decide which goals it wishes to achieve through its monetary policy, whether it is controlling inflation or the exchange rates as well as the employment in the future, and therefore implement it accordingly. The role of the country’s central bank, which is in the UK’s case the bank of England, has to be decided in carrying out monetary policy. The Bank of England for instance is given independence in deciding interest rates while the British government sets the policy targets. The government has a currently set a target rate of inflation around 2 per cent (BBC News,2014) but the bank of England’s Monetary policy committee is free to decide the rate of interest in order to maintain this percentage. The current interest rate set by the bank of England is at 0.5 per cent.(economicshelp, 2012) However whether the government and the central…
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