Commentary

Quarterly Bulletin 1971 Q4
Published on 01 December 1971

The United States announced a new economic program me in the middle of August which included measures to protect the dollar and, during the rest of the three months August to October with which this Commentary is chiefly concerned, most major currencies were allowed to float. Sterling appreciated against the dollar and additional exchange control restrictions were introduced to check the inflows of funds. The total currency inflow was again substantial, partly because of a large and growing surplus on the current account of the balance of payments. The inflow contributed, together with an expansion in domestic credit, to a rise in the money stock. Bank rate was reduced by 1% to 5% on 2nd September and interest rates both at home and abroad fell. New arrangements for monetary controls affecting the banks, finance houses and money market came into force on 16th September.

In the domestic economy, exports and consumers' expenditure on cars and other durables have increased sharply but so far without raising domestic output much or halting the growth in unemployment. The rate of increase in prices has slackened but this may owe less to moderating wage costs than to other influences, such as tax reductions and the initiative taken by the Confederation of British Industry.

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