What target inflation rate does the Government set for the Bank of England?

The Government sets a target inflation rate of 2% for the Bank of England. This target is established to provide a benchmark for monetary policy and to maintain economic stability in the country. A stable inflation rate helps ensure that the economy grows sustainably while minimizing the risks of both high inflation and deflation.

By targeting 2%, the Bank of England can help guide expectations for consumers and businesses, which can influence spending, saving, and investment decisions. Keeping inflation close to this target is considered beneficial for the overall health of the economy, as it encourages savings and spending behaviors that are crucial for economic growth.