• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Discuss the role that the Bank of England plays within the UK economy

Extracts from this document...

Introduction

Discuss the role that the Bank of England plays within the UK economy. The Bank of England was founded in 1694 to act upon the government as its banker and debt-manager. Since it was founded, its role has developed and evolved into what we have today, with its role centred on the management of the nations monetary unit, the pound and it is the infrastructure of the UK's financial system. (http://www.bankofengland.co.uk/about/history/index.htm visited 27th October 2005 last updated 12th June 2002 by Anon) The history of the Bank is one of great interest in this country, but also of continuing relevance and importance to the bank today. Events that have taken place within the last three hundred years have helped to shape and influence the role and the general responsibilities of the Bank. The Bank has moulded the culture and traditions and the expertise of the Bank as a central unit to the early years of the 21st century. Much of the history of the bank runs in tandem to the financial and economic history of this country, and often too the political history of the UK more generally. ...read more.

Middle

At each monthly meeting the members vote on what they believe should happen to the interest rates. If the vote is equal, then the Governor of the Bank of England has the casting vote. There are many different internal consumer demand changes that will affect the general public. Firstly there is consumer borrowing. Many consumers use this method to borrow money in the form of credit cards or loans. As the interest rates increase, it will become less attractive to borrow at this time as repayments will be higher Next, there is consumer debt. Because of levels of borrowing at present, higher interest rates will mean higher repayment costs. This is known as debt servicing. This will leave the consumers as a whole with less surplus income to spend as this leads to a fall in demand. Mortgage debts are present because most people have to borrow to purchase a home and the payments on their property will vary based on the interest rate. Higher interest rates means higher repayments which ultimately leads to a fall in demand. ...read more.

Conclusion

(Atril, P and McLaney E Accounting and Finance for Non-Specialists fourth edition 2004 Chapter 12 p356-357) "We have been able to demonstrate that using the point and figure charts one box system, important turning point levels for UK interest rates are predictable sometimes decades in advance. The importance of interest rate setting should prioritise forecasts." (Ronald L. Giles Managerial Finance; Forward looking UK interest rates: a point and figure chart approach Volume: 31 Issue: 5; 2005 Research paper). What this is saying is that we can predict how interest rates will fall on rise based on the current state of the economy and the position it has within the world trade. If economy is doing well then we can say that interest rates will be affected in a way in which we can predict for the future. In this case they may rise but if the economy is doing poorly then they may fall in the future. To conclude with I would say that the Bank of England plays a major role in the stability of this country. Without it this country would have no financial stability to be a world player on the trade market like it is now. ?? ?? ?? ?? Sheraz Anwar 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Retailing In India - A Government Policy Perspective

    This is inspite of the fact that trade constitutes relatively smaller portion of their economy both in terms of employment and value addition compared to India. In such a scenario, where a huge majority of the foreign players continue to protect their local industries, it is unfair to open up the Indian retailing industry alone.

  2. Case Study: The Home Depot

    This strength can be seen as the most important one of Home Depot, because Home Depot's competitors are also starting to follow a similar expanding strategy. However, until now, Home Depot has been more beneficial than its competitors. One of the reasons why Home Depot is able to expand this rapid, is their very strong Balance Sheet situation.

  1. Monetary policy of a globalised economy

    It is easy to understand the exact reasoning that led to a particular monetary policy we have to keep in mind that the central band whether it is the RBI of India or the FED of U.S. they mainly concerned with preserving the integrity of our financial institutions, combating inflation,

  2. Chinese economy sets for soft landing in 2005.

    "Our macro controls have achieved success," Zeng said. "The overheating of fixed-asset investment has lessened." But he warned that problems still exist and that curbs on lending and investment should not be relaxed. The Summit brings to Beijing more than 500 business leaders from 30 countries.

  1. National Westminster Bank

    The apparent limitations with which the bank found itself as a result of the restructuring in the 1990's made it the ideal acquisition for the Royal Bank of Scotland as a subsidiary in 2000. The �21 billion deal is the largest take-over in the history of British Banking.

  2. Is residential property in the UK a good investment?

    One would not buy a house if the expectation is that the price will fall, so when investing in property one must take this crucial factor into account. One must also take into account the state of the economy, such as these short term factors: growth of disposable income, the rates of employment and unemployment and the interest rate.

  1. How have interest rates changed over the last thirty years? What affects have these ...

    What is the aim of the interest rate Monetary policy The monetary policy is the name of the policy, which deals in changing the interest rates. Monetary policy aims to influence the demand in the economy so that consumers demand as much as is produced.

  2. The Quest for Optimal Asset Allocation Strategies in Integrating Europe.

    Then it will explain the rationale of international diversification strategies by discussing the mean-variance optimisation theory of Markowitz. It will then continue to review those theories and literature related to the topic of international diversification benefits within the EMU, including: factors affecting cross-country correlations, the question of financial integration within

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work