Question

What are the current external (foreign) conditions you think are relevant for the england central bank in deciding what to do to with the monetary policy instrument?

Answer 1

Monetary policy is introduced to control the interest rate payable for a short term borrowing (most commonly done by banks to other banks to achieve their short term needs). This process helps in controlling the effect of inflations that occur unexpectedly.
Central Bank of a nation is the most powerful body that controls the financial stability of that nation.They controls the currency and credit system of that country.
Talking about the England central bank they can use the *_open market operations*_ (an important tool in monetary policy) to control the interest rate at lower level and maximize borrowing, so that startups and investment in business get a chance of growth.
*Bank Rate*: (The rate received by the central bank while giving fund to commercial banks.)
A reduction in this rate might help the customers directly who takes borrowings from commercial banks, because reduction in bank rate might influence the interest rate which will result in increased borrowing by the peoples.
*Reserve ratio*: A reduction in the minimum reserved funds by every commercial banks under the central bank will directly help the commercial banks to offer more loans to the customers.
*Statuatory liquidity ratio*: Increased reserve requirements will allow the end customers to gain little more time from the commercial banks to regain their bonds and also allows the commercial banks to give more loans to gold and other bonds to the customers.
There are some of the important monetary policy tools which can be implemented by the central bank to tackle the inflation and current pandemic situation.