Wednesday, 23 March 2011
Bank of England - Interest Rates
Continuing on from yesterdays post of the UK inflation figures, the Bank of England has decided to keep interest rates at its historic low of 0.5%.
The policymakers voted to keep the rates the same to keep in line with their medium term goals.
Thanks for the comments yesterday, I'll explain some of these terms:
The CPI (Consumer Price index) and RPI (Retail Price Index) is how the Government (UK in this sense) measures inflation; they measure the price of household goods and compare them year on year.
Raising the Interest rates means there will be a higher cost in borrowing money, yet the value of the currency will increase, increasing the incentive to save (a savings account will have a higher interest rate).
Interest rates were cut in many countries (USA, UK e.g.) to stimulate economic growth because of the banking crisis.