preview

The Bank Of England As A Independent Institution Essay

Better Essays
Introduction:
The Bank of England became an independent institution in 1997 and their main objectives since have been to maintain monetary stability, and engage in Asset Purchasing facility, which was started in 2009. The task of handling Monetary Stability is undertaken by the Monetary Policy Committee (MPC) since 1997. In 2009 the Bank of England introduced Quantitative Easing (QE) as a method to maintain their inflation targets in the form of Asset Purchasing facility. “Quantitative easing is an unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds. This process aims to directly increase private sector spending in the economy and return inflation to target”.
The primary target of the MPC has been price stability, which has been defined by the inflation target of 2% represented by the Consumer price index. The secondary target has been to support the economic policies of the UK and meet its target in terms of growth and unemployment. Generally, the MPC is responsible for maintaining this target between the points of 2% by the margin of one percentage point, any change beyond that has to rectify in the best way possible.
However, prior to 2003 the Bank of England utilised the Retail Price Index (RPIX) as a measure for the inflation rate. Around that time it targeted a point of 2.5% inflation as optimal, while choosing a margin of 1%. Nevertheless, this paper would focus on the CPI as a
Get Access