The behaviour of the monetary aggregates during the three months under review was mixed. The narrow aggregates tended to slow down, but the broader aggregates, which had grown only modestly in the preceding three months, showed some re-acceleration. This meant that, after a year of the 1983-84 target period, sterling M3 was inside the target range and M1 at the top of it, though PSL2 was somewhat above target. This outcome reflected excessive monetary growth in the early part of the target period; in the most recent six months the growth rates of the three target aggregates were all within the range 7-1 1 %. Among the other indicators of monetary conditions, the exchange rate was fairly stable in terms of the effective index, notwithstanding the fluctuations in the US dollar. Retail price figures during the period turned out better than had generally been expected. Inflationary expectations-as reflected in market commentaries-may not have changed much. On this basis both real and nominal interest rates remained broadly stable.
Published on
01 March 1984
Operation of monetary policy