imported>Doug Williamson |
imported>Doug Williamson |
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| Monetary policy is central government or other policy to stimulate or otherwise influence economic activity by influencing money supply or interest rates.
| | ''Liquidity and funding risk in banks.'' |
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| Historically, mechanisms for influencing the money supply have included the use of open market operations, quantitative easing, the central bank discount rate and reserve requirements.
| | The liquidity risk arising from being unable to monetise assets under conditions of stress. |
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| ====UK monetary policy====
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| In recent years the primary objectives of UK monetary policy have been 'stable prices' and confidence in the currency, collectively known as 'monetary stability'.
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| 'Stable prices' are defined by the UK government's inflation target, currently 2% per annum as measured by the UK Retail Prices Index (RPI).
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| Responsibility for setting monetary policy - to achieve monetary stability - rests with the Bank of England's Monetary Policy Committee (MPC).
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| Monetary policy in the UK has usually operated through setting the Bank of England's interest rate, the Official Bank Rate, or 'Bank Rate'.
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| This rate is often referred to as the 'Bank of England Base Rate'.
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| ====Quantitative easing in the UK ====
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| In 2009, in addition to setting Bank Rate, the MPC started quantitative easing (QE).
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| This means injecting money directly into the economy by purchasing financial assets.
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| QE is designed to stimulate the economy further, beyond what could be achieved by low interest rates alone.
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| == See also == | | == See also == |
| * [[Bank of England]] | | * [[Liquidity]] |
| * [[Discount rate]] | | * [[Liquidity risk]] |
| * [[Financial Policy Committee]] | | * [[Monetisation ]] |
| * [[Fiscal policy]] | | * [[Stress]] |
| * [[Interest rate]]
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| * [[Keynesianism]]
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| * [[Monetary]]
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| * [[Monetary Policy Committee]]
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| * [[Money supply]]
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| * [[Open market operations]]
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| * [[Quantitative easing ]]
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| * [[Reserve requirements]]
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| * [[Retail Prices Index]]
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| * [[Supply side policy]]
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| * [[ZLB problem]]
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