Main Performances of Bank of England

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LM Curve

The LM curve is related to liquidity and money, which influence equilibrium in the money market. The money supply can be determined by interest rate. So the Central Bank of the UK conducted expansionary monetary policy to shift the LM curve to the right until the interest rate fell 0.2. Therefore, when interest rate goes down lead to LM curve shift right, this can further lead to increase in Y.

To sum up, in the IS-LM model analysis, IS curve shift right because of increasing liquidity in the UK market, which will active market and further will lead more output. The decreased of interest rate shift LM curve to the right

AS-AD model

In the short term, AD curve shifts to the right when increasing in consumption and investment, which can further increase in the output and improve employment rate.

Summary

Bank of England lowered its based rate target during 2008, from 5.5% to 0.5%. Money growth increased and interest rates fall. Macroeconomic outcomes have been improved relating to such changes in policy and objectives. The positive of macroeconomics outcomes can reflect in the increasing in GDP, less volatility in the business cycle fluctuations, a stable low inflation target and unemployment rate. In the Chart 3, we can find that a low stable inflation rate is nearly 2% since 2014; the UK GDP growth rate has been positive remained in around 0.5%; while the business cycle tend to be less fluctuated since 2010; the unemployment rate began to decrease from 8.5% to 5.1% between 2011 to 2015, this 5.1 percent is at near 10-year low.