Operation of monetary policy

Quarterly Bulletin 1989 Q2
Published on 01 June 1989

This article covers the three months from January to March 1989.

During the three months under review evidence accumulated that the tightening of monetary policy last year was having its intended effect in dampening the growth of domestic demand. The stance of monetary policy remained unchanged, despite periodic pressure in financial markets, with initial market optimism giving way to doubts about the pace of the slowdown as well as concern about the upward movement of interest rates abroad.

The effects of the earlier tightening of policy had most effect on the personal sector. In the housing market, price increases had already slowed in the South East, and market turnover decreased in the latter part of last year. This downturn now appears to have spread to East Anglia and the Midlands, although house prices in the North and in Scotland continued to rise rapidly, narrowing the regional price disparities which had widened sharply during 1987 and the early part of 1988. Consumer expenditure on durable goods has not grown since last summer and appears, on the basis of preliminary indications, to have eased in the first quarter of this year. Retail sales fluctuated erratically from month to month but have nevertheless shown little overall growth since the autumn of last year.

PDFOperation of monetary policy


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