Monetary Policy Committee Uk - Assignment

Added on - Dec 2019

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Monetary Policy
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Meaning of Monetary Policy......................................................................................................1Role of Monetary Policy Committee of The Bank of England...................................................2MPC likely to raise base rate......................................................................................................3Policy Conflict............................................................................................................................4CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................5
INTRODUCTIONPresent report is prepared to explain the concept of monetary policy and elucidate theimpact of monetary policy committee in UK. It also discusses the possibility of makingalterations in base rate by Monetary policy committee by making the overview of the economicconditions prevailing within the nation and its position on global grounds. Further, the reportthrows light on the policy conflicts arises in the nation with the changes brought in inflation ratesand other tool of monetary policy (Adrian and Shin, 2009).Meaning of Monetary PolicyMonetary policy is the tool adopted by central bank of the country to stabilize theeconomic condition. Using this tool, central bank control the money circulation through differentmeasures. It contributes in bringing economic growth, bring stability in price and employmentlevel, maintaining exchange rate value and many other factors.There are four types of monetary policies targeting different element, inflation targeting,price level targeting, monetary aggregates and fixed exchange rates. In inflation targeting, arange of inflation is determined by the central bank which is maintained through periodicadjustments in interest rates. Price level targeting is the approach adopted to avoid theuncertainties in price and wage rate which affects growth. In this a target is set for a particularduration of time example 3 years, 5 years (Curdia and Woodford, 2010). With the aim to bringconstant growth in money supply, through monetary aggregates approach central banks regulatesthe different classes of credits(M1, M2, M3, M4, M0). Lastly, in the fixed exchange approachcentral banks maintains the particular exchange rate value through import/export licences, capitalcontrols and other related.In order to implement the above monetary policy measures there three fundamental toolsused by central banks that are money supply, aggregates demand and banking risks. Moneysupply is stabilized through open market operations that selling and purchasing of governmentbonds Aggregate demand is regulated through making variations in interest rates (Galí, 2015).Lastly, banking risk refers to the process of making availability of reserves at banks which iscontrolled through reserve methods.1
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