Contact Us
Sign In / Sign Up for FREE
Go to advanced search...


Comments (0) Cite this document
The official bank rate is also referred to as Bank of England base rate which is the rate of interest that the Bank of England levies Banks for collateralized overnight loans. The British government uses this as the main monetary policy implementation. It is more comparable to…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.3% of users find it useful
Read TextPreview


Download file to see previous pages Since then it has been varying over the years where the present name ‘official bank rate’ was initiated in 2006 replacing the former ‘Repo Rate’ that existed till 1997. The rate of interest is levied by the nation’s central bank or the Federal bank on lending or advances to regulate the supply of money in the banking sector and overall economy. This is essentially conducted on a quarterly term to regulate the inflation rate and strengthen the nation’s rates of exchange. Any deviation in the bank rates stimulates a ripple-impact as it affects every sector of the economy. For example, the stock prices in the exchange market seem to respond to the changes in the interest rates. A variation in the bank rates has an impact on the customers as it affects the prime rates of interests for individual loans. The Bank rate is the rate at which the Bank of England gives to the commercial bank for the extra reserves being kept in safe custody of the Central Bank (Ciro, 2012, p. 122).
Conventionally, the treasury determines the rates of interests. But upon the reforms that occurred in 1992, the policy makers organized several meetings and minutes were published, yet they were not autonomous of the state which resulted into a perception that political forces were overshadowing what was stipulated to be fiscal decisions on the monetary policy. In 1997 there was operational accountability to determine the interest rates which was granted to the autonomous Bank of England by Gordon Brown-the Chancellor of Exchequer. Several principles were set for the establishment of the Monetary Policy Committee (MPC) that was enacted in the Bank of England Act 1998 (OECD, 2009, p. 31).
The Act also spelled out the accountability of the MPC: this include; meeting on monthly basis, the membership consists of the governor, two deputy governors, two executive directors of the bank ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“FINANCIAL MARKETS AND MONETARY POLICY Essay Example | Topics and Well Written Essays - 1750 words - 1”, n.d.)
Retrieved from
(FINANCIAL MARKETS AND MONETARY POLICY Essay Example | Topics and Well Written Essays - 1750 Words - 1)
“FINANCIAL MARKETS AND MONETARY POLICY Essay Example | Topics and Well Written Essays - 1750 Words - 1”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document


Monetary policy

...the supply of money in the economy while the contractionary measurers reduce the total money supply to the economy (Bofinger, Reischle and Schachter 123). Expansionary policy is theoretically used to control unemployment in a recession by lowering interest rates in the view that easy credit will motivate businesses into expanding. Contractionary policy is intended to slow inflation in a view of curbing the resulting deterioration and distortions of asset values. The Monetary policies advocated by the central bank helps in fostering the growth of financial market by encouraging open market operations. It is the most used...
7 Pages(1750 words)Research Paper

Monetary policy structural changes and hysteresis. Thirdly, the aim of economic growth is also important in that, it is linked to employment goal a supply side role for monetary policy by aspects such as savings and investment (Hammonds, 2006). Financial stability is a major concern to help the nation avoid bank panics and failures. It is also focuses on the objective of interest rate stability whereby there should be avoidance of lower rate stability for savings and investments together with promoting stability banking in the sector (Haan & Eijffinger, 2005). In consequent to this, the objective of foreign exchange market stability is essential since it targets with issues that...
10 Pages(2500 words)Assignment

Monetary Policy

...? Monetary Policy Financial s and the Economy (INSERT SECTION Monetary Policy Financial s and the Economy Since the country’s founding, the United States Federal Government has struggled with the role and control of a central bank. The controversy surrounding the purpose of a central bank links to theoretical and practical economics and politics. Views concerning the control of a central bank vary from total autonomy to strict guidelines from Congress. In order to determine policy recommendations, the following is discussed: 1. Definitions of terms 2. The history and current role of the Federal Reserve system 3. The money...
8 Pages(2000 words)Essay

Monetary policy

...? Monetary Policy Answer one: Official cash rate is that rate of interest set by the Board of the ReserveBank of Australia which is charged on the overnight funds that are borrowed or lent between financial institutions. This implies that it is that rate which is charged by financial institutions in Australia’s banking sector to other banks for overnight loans. This official cash rate is an important monetary policy instrument that influences other interest rates within the market. The RBA often determines the official cash rate after deciding on what monetary policy target it intends to...
5 Pages(1250 words)Essay

Monetary policy

...a steady growth rate between the level of output and money expenditure in the economy so as to eliminate inflation. Through this approach, the MPC therefore desires to control inflation by adjusting interest rates either upward or downward (Cobham, 2003 p. 61). After setting the national renting rate to major financial institutions, these then affect the entire economy from building societies, trading institutions, to consumers. Besides, the interest rates set by the MPC of the Bank of England is reflected in the exchange rates markets and equity stock markets. The Bank of England's Monetary Policy Committee (MPC) charged with the responsibility of...
8 Pages(2000 words)Essay


...? FINANCIAL MARKETS AND MONETARY POLICY By The of the The of the School The City and State where it is located The Date Introduction This is the Broad word that describes any market whereby there are consumers and vendors who in this case participates in the job of possessions such as shares, bonds and currencies and the derivatives. The markets are however characteristically distinct by taking the clear pricing, the basic rules and guidelines for trading, expenses and fees and the market powers that determine the amounts of securities that are able to trade. However, some financial marketplaces are only...
7 Pages(1750 words)Essay


...? FINANCIAL mARKETS AND mONETARY THEORY al Affiliation) Key words: Monetary Policy, Financial Market Term Structure of Interest Rates The interest rates’ term structure and economy are closely related. Conversely, the anticipations of real activity and future inflation can be crucial in determining the yield curve. However, the yield curve can have a predictive power and strength for both real activity and inflation. The strong relationship between macro economy and the yield curve has been the conventional theme of a growing empirical theory (Stander, 2005). Various theories have been generated to show that the relationship is bi-directional; Nelson Siegel model. Other research has offered a concrete evidence favoring instability... on the...
8 Pages(2000 words)Essay

Monetary Policy Wages, Markets and Income

...Monetary Policy - Wages, Markets and Income What major economic indicators would you look at the most if you were planning on mortgaging a home or financing another large purchase Based on Woodruff's article, one of the primary factors, which would influence my decision to mortgage my home or finance the purchase of a big-ticket item, would be the interest rate. This is because apart from paying the principal in servicing resulting debt, I would also need to pay interest expense that is tantamount to the cost of borrowing. This is mainly determined by the interest rate. In return, the interest rate may be derived through the key economic indicators such as the inflation, unemployment...
2 Pages(500 words)Essay

Monetary policy

...Monetary policy QN1. Four Chapters in “In Fed we Trust” Ten items I never new of before reading the book Key Playersof the worst financial Crisis i. Three men were responsible in managing the Great Panic. ii. The key individuals were the Treasury Secretaries, Mr. Hank Paulson, The Federal Chairman, Mr. Ben Bernanke, and Tim Geithner. iii. Details of each key player’s characteristics, and there effects on incomes. iv. Their personalities had a noticeable effect on the impacts their decisions had on the monetary system. v. The negative effects of their moves on the psyche of the markets vi. Geithner and Paulson were more prone to Gaffs than Bernanke in...
2 Pages(500 words)Assignment

Financial Innovations and Monetary Policy

...Central Banking Survive the IT Revolution?”, International Finance, Vol. 3 (Issue 2), 189-209. Grilli, V., Masciandaro, D. and G. Tabellini, (1991): “Political and Monetary Institutions and Public Financial Policies in the Industrial Countries”, Economic Policy, Vol. 6 (Number 13), 341- 392. Hetzel, R. 1991: “Too Big to Fail: Origins, Consequences, and Outlook”, Economic Review, 3- 15. Kimball, M., (2013): “Breaking Through the Zero Lower Bound”, mimeo. Mishkin, F. (2009): The Economics of Money, Banking, and Financial Markets, 9 Edition, Addison-Wesley, chapter 15. Mishkin, F. 2006: “How Big a Problem is Too Big to Fail? A Review of...
12 Pages(3000 words)Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic FINANCIAL MARKETS AND MONETARY POLICY for FREE!

Contact Us