The review describes developments in various markets, mainly during the period November to January. Early in November, the Bank's minimum lending rate (MLR) was raised from 10% to 12½%. This was followed by heavy official sales of gilt-edged stocks and it was generally felt that MLR would fall back after a few weeks. By the end of January, however, disquiet over the prospects for wages and prices was pushing short-term interest rates higher, and on 8th February MLR was raised further, to 14%. These pressures, together with growing unease over the Government's fiscal position, also caused a general rise in yields on gilt-edged stocks. In the foreign exchange markets there was on balance some strengthening in effective terms of both sterling and the US dollar.
The review contains the usual sections on international banking and the euro-currency markets, oil money movements and the commodity markets. There is also a brief account of movements in the investment currency premium in 1978: over the year, the effective premium rose on balance from 32% to 42%.
Published on
01 March 1979
Financial review