This article covers the three months/ram mid-November 1982 to mid-February 1983.
During the three months under review the main monetary aggregates decelerated substantially; over the first twelve months of the target period they were all within the target range. Moreover the twelve-month rate of retail price inflation continued to fall. The main event in the market, however, was the depreciation of sterling, which totalled some 11½ per cent in effective terms.
This depreciation occurred after a lengthy period of stability for sterling in terms of its effective exchange rate index. One of its main causes was the weakening of international oil markets and growing expectations that OPEC might lose control over the price of oil. Other factors affecting the change in sentiment towards the pound were forecasts that the UK current account balance of payments surplus would disappear, rumours of an early general election, less optimism about further falls in US interest rates, and sharp movements among other currencies.
Operation of monetary policy