The last three months have been marked by volatility in currency markets. For much of the period the US dollar was unexpectedly strong against both the yen and the deutschemark. In part this may have reflected political factors. A persistently strong dollar would be likely to weaken activity in the United States, where it is already slowing, and stimulate it in Europe and Japan, where monetary policy has been tightened in the face of inflationary pressures. A stronger dollar is also unhelpful to the adjustment of international imbalances in the longer term. Against this background, this Assessment discusses developments in the UK domestic economy and the emerging picture of the responses of domestic demand and output to earlier measures.
Published on
01 September 1989
General assessment