Monetary policy is about exercising control over the money supply (the amount of money circulating in the economy) with the aim of influencing the economy (usually in line with political objectives such as low unemployment and economic growth).
It is usually administered by a Government-appointed central bank, such as the Bank of England, which has had independence in the area since 1997. It now makes its own adjustments to money supply with the aim of meeting Government inflation targets.
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Bank of EnglandGlossary The Bank of England is the UK's central bank. It started life in 1694 as a private bank set up by London merchants as a vehicle to lend money to the government and to deal with the national debt.
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Index-linked gilts
Glossary Index-linked gilts are sterling bonds issued by the Bank of England and listed on the London Stock Exchange, introduced to act as a hedge against inflation for pension funds.
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Money supply
Glossary Money supply is simply the amount of money available in the economy.