Got a tricky question? Receive an answer from students like you! Try us!

Explain how inflation targeting operates in the UK and Critically evaluate the benefits of inflation targeting - Essay Example

Only on StudentShare
Author : klockocyrus

Summary

How inflation targeting operates in the UK and critically evaluates the benefits of inflation targeting Name College Course Date How inflation targeting in the UK operates Inflation targeting is a move by the central bank to set a specific inflation target which will then be achieved by either raising interest rates or lowering it…

Extract of sample
Explain how inflation targeting operates in the UK and Critically evaluate the benefits of inflation targeting

Inflation is all about price stability and it has been agreed by the economist that a rate of between (0-3) percent is the good enough rate fro the economy. With stable prices at that rate, consumer confidence is raised hence propelling the economy, if the consumer confidence is lower, then the economy will be stuck (Ben 2003). Inflation can only be made success through central banks making price stability its primary objective through strong institutional commitment to attaining that. United Kingdom was not the first country to introduce the inflation instead there are countries like Canada which did it ahead of them. Many countries over time have followed suit to introduce the inflation targeting within their economies with many others looking for technical assistance to help them introduce it (Richard 2005). Japan is one of the few who have not adopted it yet because of its well developed economy with rather stable inflation rate. UK inflation is therefore currently more stable in comparison with the past performance. UK quit ERM in 1992 due to rising tension between having to follow a tight policy framework in order to maintain existing exchange rate and the other option of having to cut the domestic downfall by taking down interest rates it (Richard 2005). ...
Download paper

Related Essays

Inflation
It is of importance to know that the concept of inflation is just not something that came about the other day but in actual sense it has been there for quite some time now and this fact is documented throught the economic history. The common measure of the extent of inflation is the Consumer Price Index which is used to measure the general increase and decrease in the prices of consumer goods and services. Over the years there has been several attempts of trying to come up with ways through which inflation can be measured. In the present day it is quite fascinating to report that indeed…
Interactive illustration in print media targeting children's market(under12)
Against the back drop of this information, it won’t be an exaggeration to state that the increasing sophistication of the digital market has captured a major share of the children’s segment, thus indirectly driving them away from the conventional medium of reading i.e. the print media. Furthermore, the development of internet, and the growing affordability as well as ease of home computing has led to a further growth in increasing the attractiveness of the interactive digital media. Children today, have a wide variety of options at their disposal in terms of reading and learning, with…
20 pages (5020 words)
Inflation and Real Rates of Return
Real interest rates can be positive as well as negative. A positive real interest rate indicates that the purchasing power of the individual is increasing while a negative interest rate shows that the purchasing power of the individual is decreasing if the individual invests at the nominal rate. From the calculations above, it can be understood that at the current level of inflation, if a person invests in 1-year Certificate of Deposits, he will end up with less purchasing power. It can be analysed in such a way that a higher inflation rate than the nominal interest rate means that the…
6 pages (1506 words)
Impact of Inflation in World Economics
Placing in the most generic term, inflation within an economy diminishes the value of money as a result of which the common people find it difficult to survive. Inflation and growth are such two terms of the economy that are comprehensively incompatible and can never be anticipated to meet (Economy Watch, 2011). The present research paper has been designed to critically evaluate the impact of inflation upon the Asian economies. The reason for selecting the Asian economies for study is the excessively elevating rate of inflation as compared to the rest of the world during the past a few years.…
8 pages (2008 words)
International Financial Markets: Exchange Rates and Inflation
Thus, understanding of international financial markets is very crucial for any company wishing to invest in the global markets. A thorough research before investing in international markets is critically important for the success of the investment. Feng (2007, 35) points out that global markets around the world have suffered instability and stress due to weakening of the international economy. In essence when investing in an international market dominated by foreign currency investors, investors are subject to inflation that dominates foreign markets. Ryan (2007, 112-156) argues that stocks…
7 pages (1757 words)
Article Review: Money and Inflation
Most likely firms invest in new technology to increase the productivity of their employees and that of their customers. To ensure that the investment goes through the given firm has to consider the potential return on the investment. This is the measure of performance and the effectiveness of an investment. However money is also know as a store for value, it holds its value over time it is also a second unit of account that’s why prices are often quoted in terms of money. Money is the only form that is accepted in every part of the word as a form of payment making it a medium of exchange in…
3 pages (753 words)
Growth rates and inflation rate
On the other hand, growth rates indicate the size of the economy as a result government strategies such as creation of employment, increasing the level of investment, maintaining minimum wage, reducing interest rates and creating competition among other policies. This paper aims at discussing the relationship that exists between the growth rates and the inflation rates. Impacts of inflation Increase in prices of commodities result into reduced purchasing power. This implies that each monetary unit buys fewer products. It is vital to note that the impacts of inflation are not uniformly…
3 pages (753 words)