Bank of England definition

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Bank of England

The Bank of England (BoE) is the central bank for the United Kingdom. Sometimes known as the ‘Old Lady of Threadneedle Street,’ the bank says its mission is to ‘promote the good of the people of the United Kingdom by maintaining monetary and financial stability’. Major peers outside the UK include The Federal Reserve (Fed) in the US, the European Central Bank (ECB) and the Bank of Japan (BoJ).

The Bank of England was established in 1694 to act as the banker to the British government, and is still owned by the government, although it currently has a remit to set monetary policy independently. Its roles include monetary policy and interest rate setting, producing the UK’s bank notes, supervising some bank payment systems, and ensuring the stability and safety of the financial system, which can include things like forcing commercial lenders to tighten credit lending rules.

The bank also has one of the world’s largest gold vaults, and stores gold on behalf of the UK government, other central banks and commercial firms. It is the world’s second-oldest central bank, after Sweden’s central bank, the Sveriges Riksbank.

BoE

The BoE is a popular shortening of the Bank of England.

Like other major central banks such as the Fed or the ECB, the BoE is referred to often enough to have gained an acronym. That is because of its importance in governing monetary policy, via the Monetary Policy Committee (MPC). It also has a Financial Policy Committee (FPC), instated to oversee Britain’s banks after the 2008 crash.

The BoE’s policies for maintaining monetary policy after 2008 led to a record run of low base rates in the UK. Financial traders often pay significant attention to pronouncements from the MCP about base rates, as they will play out across financial markets in a big way. The MPC has also played a major role in the BoE’s quantitative easing (QE) policy.

Bank of England meeting

What effect does the BoE’s announcement have on the UK economy, and what does it mean for traders?

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