Further progress has been made in reducing the external deficit. The balance of monetary movements was favourable in the fourth quarter of 1965. This could be consistent with a small deficit on current and long-term capital account; nevertheless it is clear that, compared with the third quarter, there was a striking improvement. However, there remains some distance to go before the underlying deficit is eliminated. Because of the need to ensure restoration of a proper external balance, and because demand at home has remained high, it has been necessary to take further steps to secure continued restraint of credit.