ECONOMICAL ANALYSIS

Economical Analysis

Economical Analysis

Introduction

The bank of England acts as the central bank and serves the United Kingdom. Bank of England was formed in the year of 1694 and since then has acted as he banker to England as well as the government of the United Kingdom. The headquarters of the bank is located in London since the year 1734. The bank became state owned and has also monopolized many banknotes throughout England. Bank of England also consists of a monetary policy Committee which is responsible to manage the monetary policy of the country. In difficult situations where there are problematic economic conditions or matters of public interest the monetary policy committee is also given the authority by the UK treasury as well as the parliament in order to work according to the requirements to fix the situation.

Discussion

The main function of the Bank of England is to support the economic policies of the country and to maintain stability in the overall prices throughout the country. A monetary stability is said to be achieved when an increase in the price does not overcome the inflation targets that have been set by the government. Furthermore, the financial stability is also obtained by proper neutralization of problems and threat that would be faced by the financial organization of the United Kingdom. The stability of monetary and financial system of the country is gained by the bank of England by the proper use of policy instruments that are used to stimulate the overall environment of the economic condition and gaining the required outputs. This is also achieved by the Bank of England and the UK government through the collaboration with the treasury and authority of financial services of the country.

Influence of Bank of England and UK government in the country's economy

In the year of 2009, Bank of England along with the government of UK announced that they will cut the interest rates to .5 percent and also said that the bank would be applying a new policy known as quantitative easing. This was because according to the economical studies there was no further space to cut down the interest rates. Through this the bank and government's target was to push the economy of the country and to save inflation from overgrowing the target which was set to 2 percent.

The bank said that it would buy almost 75 billion pounds of assets by the use of Asset purchase facility by using the money that the bank would create. In the same year of 2009, the bank also announced an increase in the purchase of assets now extending to 120 billion pounds. This was an extension of 50 billion pounds of purchase that would be done by the bank. Furthermore, the figure was then increased to 175 billion and later on to 200 billion. Till the year of 2012 the size of the asset purchase facility was increased to 325 billion pounds (The UK economy, 2012).

History

In the starting month of the year 2009, the chancellor announced that the ...