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The British Government, the Bank of England, and the British Economy - Essay Example

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The Bank of England is the central bank of UK, and it is the bank that serves the function of controlling the UK’s financial outlook. The Bank of England was started in 1694 with an objective of allowing the bank to operate as the banker of England. …
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The British Government, the Bank of England, and the British Economy
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Download file to see previous pages Presently, it is the bank in charge of the financial activities of the U.K government (Capie 2010). The bank has its headquarters at London, and has been the case since 1734. As from 1946, the bank was nationalised, and it has since monopolized the provision of banknotes in England and the Wales. The Bank’s roles of managing the country’s monetary policy are overseen by the Monetary Policy Committee (Goodwin, 2013). During times of public interest issues and economic adversity, the committee is authorised by the parliament and the treasury to employ the strategies it deems fit towards correcting the issue or situation in question. The major roles of the bank include supporting the country’s price and economic stability. Monetary stability is pursued through employing strategies to ensure that price increment does not go beyond the inflation projections of the government. Financial stability is pursued, by the bank, through the well-timed neutralization of the threats facing the country’s financial system. Financial and monetary stability are attained through the stimulation of the economic system and the manipulation of policy instruments. These strategies entail the bank’s cooperation with the treasury and the FSA (Financial Services Authority) (Capie 2010). The British Economy 2011 was a difficult year for the global economy with the UK not spared. In effect, this forced many forecasters to revise their yearly forecasts throughout the year. An example is the case of the OBR (Office for Budget Responsibility), which cut its GDP projections for the period between FY 2011 and 2013; it cut the projections from 2.4 percent, for the previous year, to 1.2 percent for a financial year, during November 2011. Furthermore, the events that followed continue to raise questions as to whether the revised figures will be realised following the worsening of the situation by the crisis in the Euro zone (Goodwin 2013). This outlook demonstrates that the financial and the monetary strategies that are altered by the bank of England, which works under the directives of the British government particularly the parliament and the treasury, which determine the stabilization strategies adopted. The poor outlook of the economy shows that the two actors have not been effective, in manipulating financial and monetary instruments to the favour of stabilizing the British economy (Gordon, Scanlon, Travers and Whitehead 2009). The Double Dip of 2012 The UK economy entered year 2012 from a weak point. The preliminary projections of GDP growth from the fourth quarter of 2011 showed that the output of the economy had contracted by 0.2 percent at the end of year 2011. The monthly output projections from official reports demonstrated that manufacturing capacity had reduced throughout the summer time. The reports showed that the service sector had demonstrated higher resilience during the same period. However, the worsening of the Euro zone crisis, starting July of 2011, triggered a sharp price decline and an increase in the volatility of equity pricing that consequently affected the outlook of both consumers and businesses. These changes demonstrate that the British Government and the Bank of England had failed in controlling price levels, and employing the strategies of containing price volatility. Partly, the situation could have been triggered by the Euro zone crisis, but it demonstrated a lack of competitiveness and skilfulness, among the two economic controllers, in manipulating financial and monetary policy to favour the resultant economic outlook (Goodwin 2013). The adverse effects of the non-controlled economic outlook were evident from the downturn evident among many businesses, ...Download file to see next pages Read More
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