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Bank of England MPC and Interest Rates

The Bank of England's Monetary Policy Committee (MPC) meets monthly to set interest rates with the goal of maintaining a 2% inflation target set by the Government. The MPC is composed of nine experts, including five senior Bank staff and four external members appointed by the Chancellor, with each having a vote on interest rates. The MPC bases its interest rate decisions on forecasts for inflation two to three years in the future, as it takes about two years for interest rate changes to fully impact inflation. If inflation is expected to rise above the 2% target, rates will likely be increased, while rates may be cut if inflation looks set to fall below target.

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66 views1 page

Bank of England MPC and Interest Rates

The Bank of England's Monetary Policy Committee (MPC) meets monthly to set interest rates with the goal of maintaining a 2% inflation target set by the Government. The MPC is composed of nine experts, including five senior Bank staff and four external members appointed by the Chancellor, with each having a vote on interest rates. The MPC bases its interest rate decisions on forecasts for inflation two to three years in the future, as it takes about two years for interest rate changes to fully impact inflation. If inflation is expected to rise above the 2% target, rates will likely be increased, while rates may be cut if inflation looks set to fall below target.

Uploaded by

ydee28
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Your money what the Bank does

Interest rates
and the Monetary Policy
Committee (MPC)
The Bank of Englands MPC meets each It takes about two years for
month to set interest rates to hit the a change in interest rates
Governments 2% inflation target. to have its full effect on
The MPC is made up of nine experts. inflation. So the MPC sets
Five are senior Bank of England staff and interest rates based on its
four are external members appointed by forecast for inflation two
the Chancellor. Each has a vote to decide to three years ahead.
what interest rate to set.

2%
Bank members

If inflation looks set to go above MPC


target, the MPC will probably
increase interest rates.

External members

People will tend to spend less If inflation looks likely to fall


and save a bit more, putting below target, the MPC will
downward pressure on inflation. probably cut interest rates
to stimulate spending and
inflation.

www.bankofengland.co.uk

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