Despite further widespread progress in reducing inflation, the prospect for continued growth of the world economy at a satisfactory pace has been threatened by the large and growing external imbalances of some major industrial countries which have led to calls for protection. The lack of progress in resolving the debt problems of developing countries has also cast a lengthening shadow over the world economic and financial outlook. Two significant and welcome international policy initiatives have been taken addressing these problems, the first results of which have been gratifying. Internationally, therefore, the future is in some ways less dangerous than might have been feared some months ago. While UK recovery looks set to continue, and inflation to fall, there must be concern that the continuing adverse trends in labour costs at home may prevent the United Kingdom from taking full advantage of the improved external environment. The monetary policy dilemmas created by these developments, among others, are also discussed in this Assessment.
Published on
01 December 1985