The Telegraph’s Online Edition Reports, Essay Example

An online article on The Telegraph’s online edition reports that the Bank of England has decided to keep the interest rate unchanged at 0.5pc. There are number of reasons for this decision such as falling inflation, the growing risk of triple-dip recession, and weak pay growth. Markets believe the rates will remain unchanged until at least next spring (Chan).

The decision of the Bank of England to keep interest rate unchanged at low level is not surprising, given the realities on the ground. First of all, there is threat of triple-dip recession in which case low interest rates are only the logical response. Low interest rates will make it cheaper for British businesses and consumers to borrow to fund their investing and consumption activities which could help boost the economic growth rate. In addition, inflation is also not a concern. If the inflation was a serious concern, it might have made sense to increase interest rate in order to curb demand for goods and services because it would have been more expensive to borrow. We also know from the article that pay growth rate is slow which could discourage the consumers to spend. But by keeping interest rates low, the Bank of England has send the message that consumers do not have to rely on their incomes only but can also access credit to fund their consumption activities.

This article demonstrates that policy makers closely watch the economic indicators to guide their monetary policies and do not just develop monetary policies in isolation. Thus, it is possible to predict the potential actions of the policy makers if one is keeping close eye on the economic indicators.

Work Cited

Chan, Szu Ping. Bank of England keeps interest rates on hold in November. 6 November 2014. 7 November 2014 <http://www.telegraph.co.uk/finance/bank-of-england/11213088/Bank-of-England-keeps-interest-rates-on-hold-in-November.html>.