The role of the Monetary Policy Committee (MPC) of the Bank of England and how it uses changes in bank rate to try to achieve the objectives for monetary policy
The MPC is a committee inside the Bank of England. It meets every six weeks and sets the bank rate — the benchmark interest rate — to keep inflation close to the government's 2% target.
Real World
In August 2023, the MPC voted 6–3 to raise the bank rate to 5.25% — the highest in 15 years — after UK services inflation remained stubbornly above 7%, threatening to embed inflation expectations.
Exam Focus
Always trace the transmission: bank rate change → commercial rates → consumption/investment → AD → inflation, rather than jumping straight to the outcome.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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