tailieunhanh - Putting more money into our economy to boost spending

Strong deleveraging pressures during the final quarter of 2011 were also associated with weak or negative growth in the volume of credit extended by many European banks. Credit extended by financial institutions in the euro area, for example, turned down during this period, with credit to non-bank private sector borrowers in the area falling by around , while assets vis-à- vis non-euro area residents declined by almost 4%. Outstanding loans to euro area non-financial corporations grew by just over 1% and loans to households for house purchases by around 2%, while consumer credit declined by just over 2%. . | Quantitative easing explained itAT o 7 2 Putting more money into our economy to boost spending 50 BANK OF ENGLAND Quantitative easing explained Stable inflation promotes a healthy economy Low and stable inflation is crucial to a thriving and prosperous economy. The Bank of England aims to keep inflation at the 2 target set by the Government. The Bank uses interest rates to control inflation. It sets an interest rate at which it lends to financial institutions - Bank Rate. That influences many other rates available to savers and borrowers so movements in Bank Rate affect spending by companies and their customers and over time the rate of inflation. Changes in Bank Rate can take up to two years to have their full impact on inflation. So the Bank has to look ahead when deciding on the appropriate monetary policy. If inflation looks set to rise above target then the Bank raises rates to slow spending and reduce inflation. Similarly if inflation looks set to fall below 2 it reduces Bank Rate to boost spending and inflation. Q. Why is low and stable inflation good A. Unstable rates of inflation are costly to households and companies. They make it hard to see how prices of individual goods are changing compared with one another. And uncertainty over future prices makes it more difficult to enter into long-term contracts. Historically high inflation has tended to be more unstable. on a year earlier UK money spending 14 12 10 1985 1988 1991 1994 1997 2000 2003 2006 2009 Spending in the United Kingdom slowed sharply in late 2008 as the global slowdown gathered pace. So the Bank cut Bank Rate substantially to reduce the risk of inflation falling well below target further ahead. 4 3 1 0 4 Quantitative easing explained Same target a new tool When the Bank is concerned about the risks of very low inflation it cuts Bank Rate - that is it reduces the price of central bank money. But interest rates cannot fall below zero. So if they are almost at zero and there is .

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