This review discusses monetary conditions, as measured by the main monetary aggregates, and events (including official operations) in the main domestic financial markets.
- The Civil Service dispute obscured underlying monetary conditions and made a difficult background for the conduct of monetary policy operations.
- Sentiment in both the money and gilt-edged markets was adversely affected for much of the period by the high level of interest rates in the United States and by the related periodic downward pressure on sterling. Nevertheless, there was a smooth transition to the new arrangements for controlling the money markets.
- There was upward pressure on interest rates over the period but the authorities accommodated only a modest increase in the very short rates which they influence.
- Sales of government debt, although smaller than the exceptionally high sales made earlier in the year, were well maintained in often difficult conditions. The authorities issued a second index-linked gilt-edged stock and abolished age restrictions on index-linked savings certificates.
- New issues of equity accelerated to the highest level since 1975 and there were further innovations in other domestic capital markets.
Operation of monetary policy