Economics class: Is it time for the Bank of England to start tightening monetary policy?
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Inflation and monetary policy
Click to read the article below and then answer the questions:
Chris Giles states that ‘the time has come to ask whether the bank should start gently tightening monetary policy.’ Outline how it could do so.
Michael Saunders, MPC member, suggests that the bank could end its latest round of quantitative easing (QE) without any serious risk to the recovery. Explain how QE is used as an expansionary monetary policy.
In 1997, the Bank of England was granted independence to set interest rates. With reference to financing the government’s deficit, explain why B of E independence has been questioned in recent times.
The bank rate is 0.1% and CPI is 3.2% (CPI target is 2%). Markets have priced in modest increases in the bank rate for Q1 2022. Evaluate whether the MPC members should vote to increase the bank rate at this week’s meeting.
Gavin Clarke, Emmanuel College