Quantitative easing and inflation Essay Example | Topics and Well Written Essays - 2000 words

Quantitative ease and pomposity - Essay casingIn the year 1694, the border was established and on 1st March 1946 it became nationalised (Sayers, 1976). It gained its operational significance in the year1997 and from then the bank can independently work on the implementation of fiscal policies (Bank of england, 2013). From the year 1993 the bank started to publish its inflation report on a quarterly basis. It contains a detailed economic abridgment with the inflation projections for the upcoming months (Tennant, 2009). By depending on this analysis, the monetary policy committee of the bank take several(prenominal) decisions based on the interest assess (Bank of England, 2013). Quantitative Easing is a strategy in monetary policy that has been adopted by several governments and central banks to ease the effect of inflation. It helps to increase the money add on by purchasing securities from government or other securities from the market (Fukasawa, 2000, p.65). As the financial institutions got flooded with jacket it helps to increase the money supply which leave alone subsequently promote to increase the lending and liquidity. Quantitative easing is used by the central banks when the interest rates have already been minimized to near 0% levels and unable to produce the desired effect (Kimura & Small, 2004, p.45). In the following research the researcher will settle to understand how the Bank of England is trying to minimise the inflation rate and if the Quantitative Easing program will cause higher inflation in future or not (Rochon & Rochon, 2012, p.69). Policy adopted by the Bank of England to minimise the inflation rate In the month of March of the year 2013 the inflation rate of United Kingdom has been rated as 2.80. For the purpose of national statistics inflation rate has been reported to the UK office. From the past recital it has been found that from the year 1989 until 2013 the average inflation rate of United Kingdom is 2.81%. In the year 1 991 it has its highest occlusive at 8.50 and the lowest was in the year 2000 rated 0.50 percentile. In this country the most important categories in the consumer footing index are transport and housing, followed by water, electricity, gas and other fuels. The following chart shows the previous inflation rate in a bar chart format- The consumer price index grew by 2.8% in the catamenia year. In spite of the large increase and decreases the CPI remain broadly flat. The central bank of UK introduced a monetary policy balloon which helps to set the interest rate to control the inflation. One needs to moderate the balloon flying at a steady height of 200 meters. It is like the same as the banks monetary policy committee tries to make the inflation steady at 2%. The main objective of the banks monetary policy is to bring stability in the price, disdain the inflation rate by supporting the objectives of the government for growth of the economy as well as employment. The targeted infla tion rate is 2%. In the budget statement each year the Chancellor of the exchequer announces the targeted inflation rate. The bank can change the interest rate however in an extreme judicial admission the government also can ask the central bank to change the inflation rate for a certain period. Depending on the consumer price index the inflation rate