Steering Monetary Policy Through Unprecedented Crises Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

In the early phase of April 2008, economic conditions in Europe seemed to be deteriorating on just about all fronts: sales figures were falling, consumer and company confidence were falling off, outlooks for European increase were being revised down, and inflation was growing. Actually, figures for the month of March demonstrated that inflation had reached an annualized rate of 3.5%, Europe's highest level since 1992. On top of these economic predicaments that are diversified, the European monetary sector-indeed, the financial sector worldwide- was in chaos.

By April 2008, global financial institutions had written down the value of their mortgage-related investments and other assets by businesses around the globe, and almost $230 billion were whining that it was ever more difficult to secure credit. In the United States, meanwhile, consumer confidence was diminishing, consumer spending had slowed to a near halt, and inflation had crept above 4%.

In reaction to these gloomy economic conditions, the Federal Reserve had steadily cut interest rates over a seven-month interval, most recently lowering its key rate to 2.25% on March18. Given the apparent inflationary pressure and the market chaos, members of the Governing Council of the ECB would have to weigh the available data incredibly attentively as they decided whether to raise, lower, or maintain their standard rate of interest. The significance of the choice could scarcely be overstated, since it had the possibility to send a powerful signal about the priorities of the ECB going and also the nature of European monetary policy.

Steering Monetary Policy Through Unprecedented Crises case study solution

PUBLICATION DATE: June 15, 2011 PRODUCT #: 711048-PDF-ENG

This is just an excerpt. This case is about GLOBAL BUSINESS