What Role Does the MPC Play in Interest Rates?

The Monetary Policy Committee (MPC) is an influential committee of the Bank of England (BofE). This committee meets for two and a half days every month with the major decision at hand of deciding the official interest rate in the UK. This is referred to as the Bank of England Base Rate.

Along with determining the Base Rate for the UK, the MPC monitors and directs several other aspects of the government’s monetary policy framework. For example, helping to meet its goals for growth and employment is a function.

It is made up of eight members, including the Governor of the Bank of England.

Another major economic influence the MPC takes charge of is being primarily responsible for keeping the CPI or Consumer Price Index, measure of inflation close to a target set by the government. The target has historically been set around 2 per cent. The goal of setting a target and maintaining a percentage close to the target is price stability throughout the UK.

The history of the MPC is quite short in length. On 6 May 1997, the MPC was officially given responsibility for setting interest rates in the Bank of England Act of 1998.

The committee was designed to be an independent entity to gain the confidence of the people, free from any political agenda.

Each member has one note in regard to an interest rate decision. They are held accountable for their vote and are expected to provide full explanation of this as to why they voted a particular way.