Speech at a Dinner given by the Lord Mayor to the Bankers and Merchants of the City of London on the 3rd November 1964.
Tradition demands that, on this occasion, the Governor should give a brief resume of events in the financial and monetary field in the past twelve months. I intend to be very brief in this respect, partly because direct intervention in the monetary field by the authorities has been modest over the past twelve months and partly because, at this time, our present position and future policies command more pressing attention.
Affairs in the money market call for few words. The money market kept the Treasury Bill tender rate close up to Bank Rate in the latter part of last year, thereby helping to retain the differential in favour of London against New York. But you will recall that during that time and subsequently the important task was to support confidence in industry, and to encourage the investment necessary to a further strengthening of productivity. Over the turn of the year such investment was thought to be getting underway, although relatively slowly. It emerged that a notable acceleration of stockbuilding had also been adding to pressures on the economy. By February it was clear that we had had a substantial increase in total demand during the closing months of 1963 and the appearances were that this would continue. These various factors, against the background of the very large government expenditure programme, pointed to the likelihood of incipient overheating and the decision was taken to increase Bank Rate to 5% an amber light as opposed to a red. The money market took the opportunity of this change to readjust the Treasury Bill tender rate to a more normal differential to Bank Rate.