Operation of monetary policy

This article covers the three months from mid-August to mid-November.

All three target monetary aggregates - sterling M3, PSL2 and M1 - rose within but remained inside the target range during the three months under review. After an apparent acceleration in monetary growth during the summer, the rate of growth of the broader aggregates seemed to stabilise at a rate of growth in the upper half of the target range. Almost throughout the period the exchange rate remained firm, beginning to weaken only in the third week of November; and the prospect for lower inflation continued to improve. Despite 5 a marked pick-up in domestic expenditure, particularly consumer spending, output remained depressed in the third quarter as stocks were run down. On balance, these various considerations continued to point to lower interest rates.

Operation of monetary policy