Explain the pre-emptive monetary policy, Macroeconomics

Assignment Help:

Explain the pre-emptive monetary policy

Since 1992 UK monetary policy has been 'pre-emptive'. In pre-emptive monetary policy authorities announce that they are prepared to raise interest rates even when there is no immediate sign of accelerating inflation in order to anticipate and head-off a rise in inflation rate which would otherwise occur many months later. The policy-makers at the Bank of England estimate what the inflation rate is probable to be 18 months to 2 years ahead (the medium term), if policy (which is, interest rates) remain unchanged. If forecast rate of inflation is different from target rate set by the government, the Bank changes interest rates to prevent forecast inflation rate becoming a reality in future. Interest rates are also raised or lowered to pre-empt any likely adverse effect upon inflation rate of an adverse 'outside shock' hitting the economy.

Though following the near meltdown of the UK economy in 2008 and in response to deep recession of 2009 it is fair to say that for a time at least, British monetary policy became reactive instead of pre-emptive. This means that interest rates are set (and further bouts of QE are introduced) not so much with medium-term future in mind though in reaction to falling national output (in the recession) and growing unemployment.

 


Related Discussions:- Explain the pre-emptive monetary policy

Economics, Consider the following: The city council has just approved the c...

Consider the following: The city council has just approved the construction of a water park in your town. You are responsible for studying the impact of the new water park on the l

Two quarters of increasing levels of production, After two quarters of incr...

After two quarters of increasing levels of production, the CEO of Canadian Fabrication & Design was upset to learn that, during this time of expansion, productivity of the newly hi

Pine village needs some additional recreation fields, Pine Village needs so...

Pine Village needs some additional recreation fields. Construction will cost $225,000 and annual O&M expenses are $85,000. The city council estimates that the value of added youth

Forex, what is largest business in thailand

what is largest business in thailand

Revenue theory, calculate, a.the total revenue b.the average revenue c.the ...

calculate, a.the total revenue b.the average revenue c.the marginal revenue price 5 4 3 2 1 0 quantity 0 1 2 3 4 5.

Monetary Economics, What is the difference between money multiplier and cre...

What is the difference between money multiplier and credit multiplier

Budget deficit, A budget deficit is defined as: A. accumulated surpluses mi...

A budget deficit is defined as: A. accumulated surpluses minus accumulated deficits. B. a shortfall of revenues compared to expenditures. C. accumulated deficits minus accumulated

Negative performances of the economy, An advantage of observing statistics ...

An advantage of observing statistics from this range is that it encapsulates both positive and negative performances of the economy helping to produce a much more accurate insight

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd