The Deputy Governor speaks of dissatisfaction with the exchange rate regime that has prevailed in the last decade. He notes that there has been considerable instability for all currencies-more than adjustments for fundamental factors would suggest-and that unless something is done about it this instability looks set to continue.
The costs of instability are considerable: resources are misdirected leading to underinvestment worldwide, wage inflation can be exacerbated, and there may also be increased pressure for protectionism. The Deputy Governor concludes that if all countries paid more heed to their exchange rate the world might begin to edge towards greater stability.
The role of the exchange rate - Speech by the Deputy Governor