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Bank of England

A detailed guide providing you with insights into the Bank of England and the Monetary Policy Committee and its influence on the UK economy

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History of the Bank of England

  • The Bank of England (BoE)  was founded in July 1694, it initially started as a private bank acting solely as the government's personal banker. The very first financial crisis to hit the Bank of England was in 1720. The South Sea Company threatened the objectives of the Bank of England as it exchanged loans directly with the government in return for trading rights in the South Seas, which was then controlled by Spain. In 1720 the South Sea Company was allowed part of the national debt, suddenly its stock price skyrocketed, causing an influx of investments. Prices then came crashing down and thousands of people who had invested in the thousands were heavily affected. 
  • Branches of the Bank of England had been established in 1826 to aid the financial crisis. Opening branches spread hope that control of banknote circulation could be maintained to prevent another financial crisis from happening.
  • Finally, in 1946 the Bank of England was finally nationalised, this meant it wasn’t owned by shareholders and was actually owned by the government; meaning that it now had the power to appoint its own governors and directors, as well as the ability to issue directions to the Bank.
  • The Bank of England produces a quarterly inflation report and is currently one of the country’s most significant publications. Once this has been released every quarter it is followed by a press conference held by both the governor and deputy governor of the Monetary Policy. This report and press conference are what traders look out for as it is normally a forecast of market sentiment. The quarterly inflation was first published in 1992 due to a request made by the chancellor at the time. 
  • The bank’s current mission statement is centred around the public good of the people: “Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability.” 

The main objectives of the Bank of England

The Bank of England is the UK’s central bank is responsible for numerous things all with the main objective to benefit the UK consumer.

Secure Payment Methods

The Bank of England issues banknotes that the UK consumer can trust, the notes have specific features which make them hard to counterfeit. The bank also monitors payment services such as VISA, as well as running the services needed to make large transfers and the banks to settle balances between each other.

Maintaining a low and stable inflation rate

The inflation rate is significant for traders, and they keep a lookout for inflation figures. The Government requires the Bank of England to keep inflation at 2% as this is the best rate for a healthy UK economy. The BoE will do this through monetary policy.

Keeping a stable UK financial system

The BoE will keep a close eye on risks that could affect the UK’s financial system and if there are any risks it will take the precautionary action needed. An example of this is lending to banks so that they themselves can lend to both consumers and businesses in turn supporting the economy.