Analyse the Bank of England monetary policy from 2001 to 2013. Divide the period in pre-crisis and post-crisis - Essay Example

Download file to see previous pages... exes within the economy such as the rate of unemployment, the rates of inflation, the interest rates for loans and mortgages, as well as, the performance of the economy. The bank of England has the monetary authority to formulate and develop monetary policies within the United Kingdom that promote and enhance economic growth and development within the country (Alexander, Balino & Enoch 2011, p.9).
The bank of England has a monetary policy committee that has the sole power and authority to formulate and implement monetary policies affecting the United Kingdom’s economy. The committee meets once every month with its main task as set by the government through legislation, to keep the rate of inflation within the country at 2% or lower. The reason why the rate of inflation within the country forms the sole and important goal of this monetary policy committee is that inflation may lead to an economic failure, or a drop in economic development and progress. A high rate of inflation results to high prices of goods and services, which may become unaffordable to most consumers. This reflects to productivity and development within the nation whereby the high rate of inflation affects investment activities as an investor will have to invest more in order to secure some tangible returns on investments, which is impossible due to the high rate of interests raised by bloated inflation rates.
Consequently, the monetary policy committee of the Bank of England meets on a monthly basis to deliberate means of securing the interest rates below 2%. The committee forecasts expected rates of inflation for a two-year period with the assumption that this may take much longer to take place, and use this platform to set a Bank Rate. The bank rate is the rate at which the bank of England charges other commercial banks and financial institutions for all the loans it releases, which in turn influences the commercial bank rates and mortgages that these banks charge the ordinary citizen or ...Download file to see next pagesRead More