The Bank of England

Similar to how the Fed is the central bank of the United States, the Bank of England is the central bank of the United Kingdom.  The goals of the Bank of England, however, differ from those of the United States.  It aims to keep inflation low, maintain trust in issued bank notes, and to promote stability in both the markets and the economy of the United Kingdom.

In a previous post, I’ve discussed the tools that the Bank of England utilizes to keep inflation as close as possible  to 2%.   The reason this low inflation rate is desirable to the Bank of England is because it protects the value of money that would otherwise be eroded by inflation.  I believe the 2% rate is not high enough, however, for the economy of England to grow.

The low inflation rate is likely because the Bank of England believes that stability is more important then a sustainable and low rate of growth in the economy.  They utilize regulation and policies to maintain a stable market.  They assess weak spots of the economy and attempt to reduce the impact of them in order to make sure the problems of one financial institution do not affect the economy as a whole.

Control over the United Kingdom’s money supply.  Ensuring that the money supply maintains its value and trust, different methods are used by the Bank.  Bank notes are only valuable because of the trust that they can be used to pay for goods and services.  Each note issued by the bank has raised printing, watermarks, metallic threads, and holograms to make sure the notes are legitimate.

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Works Cited: http://www.bankofengland.co.uk/about/pdfs/whatthebankdoes1.pdf