Central Bank Policy Tools Flashcards

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What is the Bank Rate in the UK?

It is the interest rate set by the Bank of England. It guides other interest rates.

It makes borrowing more expensive and saving more rewarding. This slows spending and can lower inflation.

It makes borrowing cheaper and saving less attractive. This can lift spending and push inflation up towards the target.

It is when the central bank creates new electronic money to buy government bonds.

To lower long-term interest rates and add more cash to the banking system.

It is the reverse of QE. The central bank sells bonds or lets them mature to reduce money in the system.

Buying or selling government bonds each day to manage bank cash. This keeps short-term market rates close to the Bank Rate.

Public statements about likely future interest rates. They guide the choices of households and firms.

Short-term lending and deposit options for banks. They help keep market rates near the Bank Rate.

The central bank gives emergency loans to a bank in trouble. This helps keep the payment system working.