... alternatively the demand for credit and loanable funds are at their highest when interest rates are low. By plotting these to curves, we can calculate the equilibrium rate of interest, and would be able to see it move in relation to changes in the economic environment, such as a rise in the demand for capital equipment due to an improvement in technology. If this were the case then there would be an increase in the demand for loanable funds and the demand curve would shift to the right, increasing the interest rate and therefore encouraging a higher level of savings. . [http://bss.sfsu.edu] In reality, the Bank of England's determination of the official interest rate is obviously a far more complex matter, taking into account many factors, such as house prices, consumer spending, exchange rates and most importantly inflation. The Bank of England's ability to set interest rates is one of their most ...

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