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Bank of Englands Monetary Policy Committee Decisions

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During March, the bank took decisions like purchasing of private sector assets under the Asset Purchase Facility using central bank reserves and to buy gilts for fulfilling the overall quantity of purchases if the purchases fell a short of £ 75 billion targets to improve the UK economy. This continued in the month of April also. In May, the US and euro market faced the narrowing of LIBOR spread. 13% rise has shown by the UK equity market and sterling exchange rate showed a slight increase. Maintaining the bank rate at 0.5% and “ finance a further £ 50 billion of asset purchases by the creation of central bank reserves, implying a total quantity of £ 125 billion of such asset purchases. ” (Minutes of the monetary policy committee meeting 6 and 7 May 2009 2009, p. 11).

are the decisions taken by the committee in the month. In June 2009, we can see a fall of 20 base points in the spread between three-month Libor rate and the risk-free rate, increase in Euro by 20-50 points and appreciation of Sterling by 4%, depreciation of dollar ERI by 5.5%.

In the June meeting, no new initiative decisions have been taken. Maintenance of bank rate at 0.5% and continuation of the asset purchasing program of May amounting £ 125 billion are the decisions taken in the meeting. We can see that, from March onwards, the monetary policy decisions have changed from interest rate to the asset purchasing program. The economic downturn shows a recovery and stabilization of the housing market will make the economy strong in the coming years. Review of the decisions taken by the Monetary Policy Committee during 2008: By analyzing 2008 from January to December, we can a tremendous change in the bank rate from 5.5% to 2%.

In the first half of 2008, we can see a sharp increase in CPI inflation resulting to be at 5.2%. In September, an expectation of a downturn in the economy due to the increase in the prices of energy, food etc, has made the bank to reduce the bank rate. Even though there was a reduction in energy prices and VAT, the CPI inflation was still in its position.

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