The role of the Bank of England for the UK Economy

back of new twenty pound noteThe Bank of England is an organisation that sits like a type of sovereignty, presiding over the UK economy to ensure it remains stable. Sir Mervyn King, the Governor of the Bank of England, is effectively the ‘face’ of the institution as he is the person who makes any public announcements in relation to the economy.

History

Though he holds the ultimate responsibility, he is not alone and works with others to achieve the goals of the Bank. The Bank of England has been in existence since the seventeen century, at which time it was simply a bank of the government. However, since that time, the role of the institution has developed to encompass a number of roles, including forming policy-making committees.

Purpose

It is no accident that the public do not often hear anything from the Bank of England until it is time to confirm the level of inflation or the interest rate. This is two of their main roles and can affect savings and borrowings. In addition to this, the Bank of England is responsible for issuing bank notes, the number of which must be tightly controlled to ensure the currency remains stable. Having control over the economy of the United Kingdom, the purpose of the institution is to ensure that the country does not succumb to any threats to its financial security.

Ability

The Bank of England has a range of responsibilities and abilities that are used to maintain control over the economy and ensure that it remains stable. Controlling the level of inflation is one of the strategies used by the institution, which is achieved by deciding on the interest rate. Similarly, the Bank of England regulates the financial infrastructure of the country by reacting to changes in the world money market, of which the institution must be aware. The Bank can also bail out failing banks by acting as a lender, which is usually a last resort to avoid a complete collapse.

Photo: Kevin Jarratt – Fotolia

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