Incomes and prices continued to rise strongly during the three months from November to January, with which this Commentary is mainly concerned. Yet the economy remained subdued, although output began to increase towards the end of the year. U.K. interest rates changed little, despite a steep fall in international rates from late December onwards, for the authorities were unwilling to relax monetary restraints when domestic costs and prices were rising so fast. Thus interest differentials attracted inflows of exchange, particularly in January, in addition to those generated by a large balance of payments surplus on current account; U.K. companies also converted into sterling further substantial amounts borrowed in foreign currency to assist their domestic financing. These exchange inflows tended to ease domestic liquidity; but very large official sales of gilt-edged stocks in January had the opposite effect. The increase in domestic credit in the fourth quarter was not significantly larger than in the third, but the money stock rose more than domestic credit, because of the inflow of exchange.