Domesday Live

What does the Bank of England do?

The Bank of England is the UK's central bank. Its main job is keeping inflation near 2%. It does that mainly by setting an interest rate, called Bank Rate, which affects what banks charge for mortgages and loans and pay on savings. It is run independently of the government.

Why it happens

• A target for inflation. The government sets the Bank a target of 2% inflation. A committee of nine people votes on the interest rate about eight times a year.
• Raising and cutting the rate. If inflation is too high, the Bank raises the rate to make borrowing dearer and slow spending. If it is too low, it cuts the rate to encourage spending.
• Other tools. The Bank can also buy or sell government bonds (quantitative easing and tightening) and it watches over the stability of banks and the financial system.