General assessment

Quarterly Bulletin 1988 Q3
Published on 01 September 1988

The world economy has again grown more rapidly than had been expected. This is reflected in a higher level of capacity utilisation in industrial countries and also a higher level of non-oil commodity prices. Both of these developments carry a threat of higher inflation, to which most countries have responded by raising interest rates. The United Kingdom has shared fully in this experience while the growth of domestic demand here has exceeded that both of the major overseas economies in aggregate and of domestic supply. This Assessment discusses these developments and the UK policy response of raising interest rates without provoking an excessive strengthening of sterling. This has produced a combination more compatible with the objectives of policy than was the case three months ago.

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