Business Environment

Business Environment CASE STUDY (20 Marks) Low interest rates were one of the prime reasons for the sustained booms in Britain's housing market, while a weak dollar was one of the prime reasons for a strengthening pound. The Monetary Policy Committee of the Bank of England was caught in a dilemma whether to contain the booming housing market by increasing interest rates or restrain the appreciating pound by decreasing interest rates. Finally, the Monetary Policy Committee chose to contain the housing market by increasing interest rates with the hope that the pound would not appreciate much. However, the falling dollar did not seem to help them.

Answer the following question. Q1. Give an overview of the case.