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    raise interest rates to reduce the growth of consumer spending and AD. The UK economy is very sensitive to interest rate changes; this is because of high levels
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    The MPC is responsible for setting interest rates and trying to meet the govts target of CPI =2% +/- 1. As a secondary objective they also need to consider the impact of interest rates on the wider economy, notably output and unemployment.

    Monetary policy is also pre emptive; this means they try to reduce inflationary pressures before they occur. Therefore, the MPC look at a variety of economic indicators to be able to judge future inflation trends. In particular, they look at the amount of spare capacity in the economy, and the rate of growth compared to the Long Run trend rate. If inflationary pressures are increasing, the bank will raise interest rates to reduce the growth of consumer spending and AD. The UK economy is very sensitive to interest rate changes; this is because of high levels o

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    pact of interest rates on the wider economy, notably output and unemployment.

    Monetary policy is also pre emptive; this means they try to reduce inflationary pressures before they occur. Therefore, the MPC look at a variety of economic indicators to be able to judge future inflation trends. In particular, they look at the amount of spare capacity in the economy, and the rate of growth compared to the Long Run trend rate. If inflationary pressures are increasing, the bank will raise interest rates to reduce the growth of consumer spending and AD. The UK economy is very sensitive to interest rate changes; this is because of high levels

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    y pressures before they occur. Therefore, the MPC look at a variety of economic indicators to be able to judge future inflation trends. In particular, they look at the amount of spare capacity in the economy, and the rate of growth compared to the Long Run trend rate. If inflationary pressures are increasing, the bank will raise interest rates to reduce the growth of consumer spending and AD. The UK economy is very sensitive to interest rate changes; this is because of high levels
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    t the amount of spare capacity in the economy, and the rate of growth compared to the Long Run trend rate. If inflationary pressures are increasing, the bank will raise interest rates to reduce the growth of consumer spending and AD. The UK economy is very sensitive to interest rate changes; this is because of high levels
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    raise interest rates to reduce the growth of consumer spending and AD. The UK economy is very sensitive to interest rate changes; this is because of high levels of debt, both mortgage and credit card debt. Therefore, a moderate 0.5% increase in interest rates can have a significant effect in reducing demand.

    Since the Bank of England was made independent in 1997 they have had full control of monetary policy and have been able to successfully keep inflation within the govts target. It appears the UK economy has been able to avoid the boom and bust economic cycles that characterized the post war period. By having an inflation target the MPC have been able to maintain a discipline of avoiding a booming economy.

    In addition, because the Bank of England is independent from political pressures

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