Operation of monetary policy

This article covers the three months from mid-August to mid-November 1984.

Conditions in the financial markets were generally calmer than during the summer, helped by the restoration of confidence that both the fiscal and monetary situation were under adequate control. Towards the end of the period strong pressure emerged for lower short-term interest rates and the general level of rates fell by a further 1%; gilt-edged yields also fell, despite a continued high rate of official sales.

The behaviour of the monetary aggregates was generally satisfactory up to mid-October. Both the target aggregates MO and £M3 were then within their target ranges; among the other aggregates, M2 continued to be affected by changes in the terms of existing accounts while the growth rate of PSL2 continued to exceed that of £M3 by roughly the same margin as in earlier months.

Operation of monetary policy