Business Studies Course - Investment
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Central bank - Reading

Read this article from City Chat website, and then answer the questions opposite. When you have finished, click 'answers' to check your results.


The delay between the announcement of a move in interest rates and the minutes of the meeting which inspired it is always a nuisance. After all, it would be very useful to know what is going through the minds of the Bank of England monetary policy committee as they come to their decisions. Well, now we know. The committee voted 8-1 in favour of a half point cut. That's a lot. It represents a huge gain for the doves, and it causes more than a slight worry as to what caused the hawkish members of the committee to change their minds.

In part of course, this is yet another example of the Bank working closely with the US Federal Reserve. For a number of reasons, the Fed has been forced to cut interest rates repeatedly over the past few months in its efforts to persuade the US economy to take off. However, with the Fed running out of runway, it would not help investor confidence in the US if the Bank of England indicated that it felt no need for a cut.

So the Bank of England cut, and quite deeply. That this can be done without causing inflation is yet another sign that the danger of a recession is increasing. The housing market is cooling, and unemployment is on the up, even when seasonal variation is discounted. This together with problems in the world economy shows that the bank is preparing for difficult times.

Of course, while the cut is bad news for savers, debtors will be cheering. As Britain is mostly a nation of debtors (thanks to the huge number of mortgages out there) this is generally good news. The market rose on the back of the announcement, with heavily indebted companies such as Macroni and Belshem's doing especially well. Shares have even soared at Rhymington FC, which borrowed a lot of money to buy top players.


1. A good time to owe money.
a.   b.   c.   d.   e.    

2. So why did they cut?
a.   b.   c.   d.   e.    

3. Showing solidarity.
a.   b.   c.   d.   e.    

4. Now we know.
a.   b.   c.   d.   e.    

5. Trouble ahead.
a.   b.   c.   d.   e.