This article covers the three months from mid-May to mid-August 1985.
With different indicators pointing in different directions, the interpretation of monetary conditions remained complicated in the three months under review.
The background economic developments during the period are described in the commentary on page 349. In brief, the short-term prospect for retail prices improved, but the upward creep in pay settlements and earnings, notably in manufacturing, continued, despite the slower growth of productivity since 1983, so that the longer-term concern about unit labour costs remained. Economic activity and business confidence, as reflected in survey evidence, held up perhaps better than might have been expected, and the rise in unemployment slowed. But there is a risk of softening of demand into next year if world economic recovery slows down.
Operation of monetary policy