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

In early April 2008, the economic situation in Europe there is reduced on almost all fronts, sales fell, business and consumer confidence have been falling sharply, the forecasts for European growth was revised down, and inflation is rising. In fact, the data for March showed that inflation reached an annualized rate of 3.5%, the highest level in Europe in 1992. On top of these broad economic challenges, the European financial sector, in fact, the financial sector around the world was in turmoil. By April 2008, global financial institutions have recorded the value of their mortgage investments and other assets of at least $ 230 billion, and businesses around the world have complained that it was harder to get a loan. In America, meanwhile, consumer confidence is falling, consumer spending slowed to a near halt, and inflation climbed above 4%. In response to the dire economic conditions, the Fed cut interest rates steady for seven months, recently reduced its key rate to 2.25% on March18. In sharp contrast to the Fed, the European Central Bank (ECB) has long held its key interest rate at 4%, where it stood when the Governing Council of the ECB reconvene April 10, 2008. Given both the market turmoil and obviously inflationary pressure, members of the Governing Council of the ECB will have to weigh all the evidence very carefully, as they decided whether to raise, lower or maintain their interest rate. The significance of this decision can hardly be overestimated, as it had the potential to send a strong signal about the nature of European monetary policy and the ECB priorities going forward. "Hide
by David Moss, Cole Bolton Source: Harvard Business School 55 pages. Publication Date: June 15, 2011. Prod. #: 711048-PDF-ENG