What does the Bank of England do?

The Bank of England is the UK’s central bank, providing banking services both to the government and to the banking system. Its job is to maintain financial and monetary stability in the UK economy (‘financial’ relates to finance, which is the commercial activity of providing funds and capital, whereas ‘monetary’ refers to the amount of money in circulation, its rate of growth and interest rates). The Bank of England issues banknotes, acts as ‘lender of last resort’ for the other banks, and controls the UK’s gold and foreign exchange reserves. The Bank became independent from the government (which had nationalised it in 1946) in 1997, since when it has been responsible for setting UK interest rates. Its Monetary Policy Committee adjusts interest rates to keep inflation in line with the Chancellor’s annual inflation target stated in the Budget, which is based on the Consumer Price Index.

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