In twelve pages and 3 parts this paper examines how the economy of the United Kingdom was affected by interest rate lowering. Nine sources are listed in the bibliography.
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relevant to both of these perspectives. In the UK there has been a period of great stability, the base interest rate has been set at 4% (as of 2nd October
2002), where it has been since November 2001. This is a reflection of the economic conditions and also of monetary policy. If we went to understand why interest rates have
fallen since the year 2000, and the impact that these falls and low rates have had on the economy we first need to look at some background, considering who sets
the interest rates, and why, along with what consideration they may have when making the decisions. When we understand the basics of interest rate policy we can then look t
the way that interest rate movements may impact on the economy, This will increase understanding of the process and considerations regarding interest rate movements, but will also indicate the resulting
economic conditions that may be observed following an interest rate change. Then we can apply the theory to the reality, by looking at the UK economy, and how it has
behaved with reference to the interest rate policies. II. The Role of the Bank of England Interest rates are set by the Bank
of England, however this has not always been the case. The Bank of England was traditionally under the control of the government. When it was national policy to use interest
rates as a tool to control inflation the final decision as to whether or not interest rates would increase was seen as residing with the government, and not the bank.
Therefore, the bank was in many ways merely a subsidiary department of the government. It was only in 1997 that the Bank of England was granted the freedom to make