The Bank of England

The Bank of England (formally the Governor and Company of the Bank of England) is (despite its name) the central bank of the whole of the United Kingdom and is the model on which most modern, large central banks have been based. The Bank of England of was established on July 27, 1694 with £ 1,200,000.00 by William Paterson to act as the Government's banker and debt-manager. Since then its role has developed and evolved, centred on the management of the nation's currency and its position at the centre of the UK's financial system. The Bank was privately owned and operated from its foundation in 1694 until it was nationalised in 1946. In 1997 it became an independent public organisation, wholly-owned by Government, with independence in setting monetary policy.

The Bank of England is the UK's central bank. It's not like a bank in your local high street. It has special functions that help keep the economy and financial system stable. That affects us all.

The Bank of England is the UK's central bank

• It sets interestrates to keep inflation low to preserve the value of your money

The Bank of England's monetary policy in short influences the interest rates Interest rates can take up to two years to affect inflation. So today's Bank Rate decision is based on where the MPC thinks inflation is heading over the next few years. That is always uncertain because unexpected things will happen. So nobody knows what the interest rate will be in the future. Each month the MPC looks at how the economy is faring and whether the outlook for inflation has changed.

It sets interestrates to keep inflation low to preserve the value of your money

The Bank aims to keep the annual rate of inflation at 2% – the inflation target set by the Government. Some prices will rise by more, others by less. But, on average, the aim is that prices across the economy rise by 2% a year. Since 2003, the inflation target has been set in terms of the Consumer Prices Index (CPI).

• It issues banknotes with special security features so you know your money is the real thing

Promises, promises

The Bank of England has been issuing banknotes for over 300 years. Early banknotes were receipts for gold deposited at the Bank. The holder of a banknote could bring it to the Bank of England and exchange it for gold. This is no longer possible, but banknotes