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Monetary policy

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Reference no: EM13679251

Monetary Policy

We are in 2012 and you have just been appointed Governor of the Central Bank of a hypothetical advanced economy, and you have to chair your first Monetary Policy meeting. The charts below display three major indicators for the economy, together with the Central Bank rate, your main policy tool (your economy operates under a free floating exchange rate regime, and the Central Bank is independent).

2366_Monetary Policy.png

What should you do? Briefly but carefully explain the pros and cons.

Note: You should focus on answering the question asked, based on the information given only; there is no need or interest in second guessing which country it could be.

Reference no: EM13679251

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