An improvement of the UK monetary policy occurred because of inflation targeting. The most positive result of the Bank independence is a right of setting interest rates. The Monetary Policy Committee is often supported by the fact that if times are tranquil and there are no domestic changes then MPC is able to cope with the situation and conduct monetary policy. On the other hand, an increase in oil price may lead to MPC’ s hardships. Moreover, the fact that MPC has tended to forecast inflation and suppress output date is another claim of critics (Dotsey, 1987).
Therefore critics claim that “ … interest rates may have been set too high, but had the output forecasts been more accurate, interest rates might have been set even higher” (Maxwell, 2000). The Bank of England is often accused of errors in forecasting the exchange rate, prognosticating GDP data thus leading to a spoiled reputation of the Bank. With regard to the sources considered above, the role and responsibilities of the Central Bank of UK are considered with reference to previous years and to current tendencies.
A consideration of future prospects of the Central Bank is focused on maintenance of its track record of achieving inflation targeting; support cooperation with MPC; management with regard to the changeable nature of inflation etc. These issues are covered in the works of recent years. Moreover, there is great attention paid to governance improvement in the Central Bank in order to prevent crisis consequences. Along with this issue, consideration of the establishment of audit committees is developed. The roles and responsibilities of these committees should be well-developed and defined in order to control the Central Bank monetary policy and other activities.
This idea has a strong background because public confidence in the Central Bank is a guarantee of Bank’ s deposits and the increase of financial resources. Therefore for any Bank, it is appropriate to involve independent external auditors in order to show their transparent policy and efficient work.
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