The factors considered by the MPC when setting the bank rate
The MPC looks at a range of economic data before deciding whether to raise, cut, or hold the bank rate. Key factors include current inflation, economic growth, unemployment, and global conditions.
Real World
In late 2023 the MPC held the bank rate at 5.25% partly because wage growth was running at 7.8% — a sign that domestic cost-push pressures could keep inflation above target even as energy prices fell.
Exam Focus
List at least three distinct factors with data; single-factor answers rarely reach the top mark band on 'assess' or 'evaluate' questions.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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