Learn about the Bank of England’s monetary policy

Did you know that the blueprint for modern central banks emerged from the founding of the Bank of England? Watch our latest video and find out where to look for the Bank of England’s monetary policy and its inflation report.

Bank of England Monetary Policy Committee

We’re now going to consider the Bank of England. In fact, the blueprint for modern central banks emerged from the founding of the Bank of England. The Bank of England, or BOE, as it’s known, was created in 1694, in order to help fund a war against France. In fact, it raised over one million pounds in its first days of service. The King and Queen at the time, William and Mary, they were two of the original stockholders, and for many years, the Bank of England was privately owned. The original Royal Charter of 1694 declared that the bank was founded to promote the public good and benefit of our people, and that still is its essential mandate today.

It was in 1734 that the Bank of England moved to its iconic location in Threadneedle Street, where it still stands today. When the bank was nationalized in 1946, it meant that it was now owned by the Government, rather than private stockholders, and this gave the Government the power to appoint the Bank’s governors and directors and issue directions to the Bank. Today, the Government’s power to issue directions to the Bank has not been used. In 1997, the, then, Labour Government granted the BOE the right to set its own monetary policy, without Government interference.

The success of the Bank of England has meant that many countries around the world have copied the blueprints laid down by the Bank of England. Today, it’s run by the Monetary Policy Committee, and they are referred to, and you’ll see it on the newsfeeds and in articles, as the MPC. Now, the MPC is a nine-member group and that consist of a governor, two deputy governors, two executive directors, and four external experts. They want to maintain monetary and financial stability, in order to maintain confidence in the currency. Their inflation target is around 2%, and they meet monthly to discuss and adjust monetary policy. And by following the minutes of the Monetary Policy Committee, you can begin to get insights into the forward guidance of the world’s earliest central bank.

And, if you look online, you can see, this is the Bank of England’s website, bankofengland.co.uk. You can go onto the News and publications tab, Press Publications, and you can now filter the publications by topic. So, if you want to see the Monetary Policy Committee’s minutes, you simply go there and you have all the different reports that have come out from the Monetary Policy Committee. This is the last inflation report on the 10th of May. And, by simply downloading the report, you have that to read for yourself and in the report, it tells you, obviously the mandate of the Monetary Policy Committee, and it gives you the summary and the outline of what they consider to be important and the outlook for inflation. And obviously, by following it, inflation traders get a very good insight into whether interest rates are going to be cut, or whether they’re going to be raised in the near term future.