Interested in interest rates?

In 1997, one of Labour’s first policy decisions was to give control of all decision relating to money supply to the Bank of England. This separation was meant to ensure a more stable monetary policy, and is supported by all parties.


Yesterday, the Bank of England decided to hold interest rates at a record 0.5% low for the 11th month in a row. This is meant to make it cheaper to borrow money, primarily to help encourage businesses to invest.

However, since the recession began, another important policy instrument has been used by the Bank- quantitative easing. The Bank has pumped £200bn into our economy- sometime called printing money, but in these modern times it is more like an electronic transfer. Imagine looking at your account one day and seeing a credit of £200bn- happy times. Yesterday, the Bank announced they would not be increasing this supply.

But where is this money going? Is it being stored by the banks, or used by the banks to help businesses? Is it helping economic recovery?

Perhaps these are questions best answered in the aftermath. What is clear is that if we had joined the Euro, we would not have had this control over money supply. Our interest rates would have been set by the European Central Bank- which are currently 1%, and have been for the last nine months.

Our main parties have been rather quiet on the Euro recently- but it is always an issue that comes round at election time. Almost certainly any Government that wanted the UK to join the Euro would have a referendum first. How would you vote?

Poli-Chick xx