The review describes developments in various markets, mainly during the period May to July.
Conditions were unusually tight in both the money markets and banking system. In the money market, short-term interest rates rose sharply in the middle of June and remained high thereafter. In the gilt-edged market, turnover was lower in May but subsequently recovered. Yields on most stocks fell by about one percentage point. There were large net official sales of stock. The foreign exchange markets were much quieter than in the previous three months. The value of the US dollar declined as US interest rates eased. In spite of the cut in minimum lending rate (MLR ) sterling rose by some 5% against the dollar to reach a five-year peak.
Financial review