The UK economy continued its response to tight monetary conditions, and the general level of interest rates was maintained at 15% throughout the period under review. In the early part of the year there were some signs of a small revival in consumer demand, but more recent data have given comfort that any revival was short-lived. Meanwhile the deceleration in broad money and in lending, both to companies and to individuals, has become increasingly clear, although little adjustment has so far been evident in the pace of real corporate activity. Inflation itself continued to increase during the quarter. In the circumstances, the strengthening of sterling in May and June, reversing the fall in the exchange rate index since the end of the third quarter last year, provided a welcome tightening of policy.