In December, the Bank of England reduced interest rates by another 50 basis points after it had cut by 150 basis points in November. But the rate cut may even be larger. Economists "... expect the Monetary Policy Committee [MPC] to cut rates to 2.5 percent,"...while others "...saw a bigger 75 poin cut"...or "a 100 basis point move. "
Reuters, 11/27/200
Which of the following statements describes the effectiveness of the monetary policy?

Question

Quizplus · Accepted Answer

This statement suggests that while the rate cuts may boost real GDP, there are factors such as inflation expectations and lag time that can hamper their effectiveness. It does not mention other central banks or the need for fiscal policy. It also does not mention changes in exchange rates and bank reserves as predictable outcomes of interest rate changes.

In December, the Bank of England Reduced Interest Rates by Another