|
Monetary Policy - Monetary Policy Committee
Theories
The Monetary Policy Committee of the Bank of England is responsible for setting the level of short-term interest rates in the economy to meet the inflation target set by the government. If they are to do this effectively they have to understand fully the effect that interest rates have on the economy. This process is known as the 'monetary transmission mechanism' and is an important area of inflation theory. The MPC is aiming to hit the inflation target set by the Chancellor in his Budget each year. Follow the links below for more detail on each of these.
- Monetary Transmission Mechanism - the monetary transmission mechanism shows how interest rate changes affect inflation.
- Inflation targeting - since leaving the Exchange Rate Mechanism (ERM) in 1992 we have had an inflation target, but how do they work, and what is the exact nature of the target?
|
