1. Now take a closer look at the text to find the information on the following points:
1. Enumerate the matters handled by the Bank of England since its foundation.
2. What does operational independence over monetary policy imply?
3. What is the relevance of Consumer Price index?
4. How and why did the Bank of England assist the Northern Rock?
5. What does the term the lender of the last resort imply?
6. How does a mechanism of base interest rate adjustment work?
7. Is a monopoly for issuing banknotes a good thing? Can it prevent counterfeiting?
8. What other institutions together with the Bank of England make up the regulatory framework? What are their functions?
2. Complete the table with derivatives denoting financial wrongdoing:
Verb
|
adjective |
Noun |
Abstract noun |
To fraud |
|
|
|
|
|
|
Forgery |
|
|
Thief |
|
To counterfeit |
|
|
|
3. Give American equivalents of the British words:
HM Treasury
The Chancellor of he Exchequer
The FSA
The Monetary Policy Committee
Don't get your hopes up
May 14th 2009 From The Economist print edition
Despite signs of improvement the economy still needs intensive care
THE Bank of England’s austere home in Threadneedle Street may not look like a hospital but for the past few months it has been acting like one. As the economic downturn became a full-blown collapse late last year, the central bank’s senior consultants—its monetary-policy committee—donned their white coats and got to work.
First they put their scalpel to interest rates, slicing them from 5% in early October to an all-time low of 0.5% in March. Not content with that, they switched at once from scalpel to syringe and started to inject money into the economy through “quantitative easing”—buying assets with freshly created central-bank money.
As with the preceding rate cuts, the new treatment has been administered in uncompromisingly big doses. Twice, the Bank of England has surprised the markets with the ambition of its planned purchases. The initial goal it set in March of buying £75 billion ($114 billion) of assets, predominantly gilts held by investors such as insurance companies, was well above expectations. The bank’s decision on May 7th to raise that objective to £125 billion, to be completed in three months’ time, was also more than predicted.
So is the emergency treatment working? There have been some encouraging signs over the past couple of months. The stockmarket has rallied sharply as investors have regained their nerve and fears about banks going bust have receded. Surveys of businesses and consumers have also picked up, as sentiment has become less negative. With an index of leading indicators for the British economy compiled by the OECD now starting to edge up, hopes are rising that the worst of the recession may be over.
That may be premature, given the pain shown in the latest labour-market figures. The number of jobless looking for work jumped by 244,000 between the last three months of 2008 and the first three of 2009, the biggest rise since 1981. That pushed unemployment up to 2.2m and the jobless rate up from 6.3% to 7.1%. In another sign of weakness, average earnings fell by 0.4% compared with their level a year ago—the first ever decline in figures going back to 1964, though this was largely because bankers received lower bonuses.
The Bank’s quarterly Inflation Report presented on May 13th was even gloomier than the forecast three months ago (see chart). The new central projection implies that GDP will drop this year by around 4%, compared with 3% in February, and will grow by 1% in 2010 rather than the 2.3% previously predicted.
The bank envisages a recovery starting by the end of the year that will spring from three main sources. First, the economy will be boosted by what Mervyn King, the bank’s governor, describes as an “unprecedented policy stimulus, both monetary and fiscal”. Second, the big depreciation in sterling will help by supporting exports and constraining imports. And third, the inventory cycle will turn round as producers start to satisfy demand by raising output rather than running down stocks.
All this should lead to a rebound, but Mr King says that a sustainable recovery is far from assured. That will leave the patient in a critical condition for some time to come. Although the central bank has become less worried about deflation, its central forecast shows consumer-price inflation, currently 2.9%, falling below 1% later this year and staying below the 2% target over the forecast horizon. With the economy remaining frail, the base rate looks set to stay at 0.5% for a long time.
The Bank of England will provide additional help through its policy of quantitative easing. Mr King explained that the bank had decided to expand the programme of asset purchases because more needed to be done to boost the supply of broad money. Just how effective the policy will prove cannot yet be judged.
The Bank of England has delivered a sombre warning. A swift return to rude economic health is highly unlikely after the financial and economic convulsions of the past two years. A prolonged convalescence is the best that can be expected.
Crosschecking