Commentary

The Commentary this time is mainly concerned with events during February to April, though later developments are touched on where necessary. During this time there was some further recovery in the position of sterling; it was nevertheless slower than had been hoped and the market remained sensitive. More short term assistance was taken under the $3,000 million arrangements made last November; this was repaid when a drawing of $1,400 million was made from the International Monetary Fund in May. There has also been a further improvement in the balance of payments, though there is still a long way to go before the position is secure. Additional steps were taken in the Budget early in April to reduce the growth in domestic demand, notably through higher taxes on consumption; and other specific measures were introduced to act directly upon the balance of payments. At the end of April the existing restraints on credit were reinforced by calls for Special Deposits from the London clearing banks and Scottish banks. The Governor of the Bank subsequently wrote to the main banking and financial associations asking them to co-operate in restricting the expansion of credit in the year to March 1966 and in ensuring that it was made available only for the most necessary purposes, especially exports.

Commentary