Some remarks on exchange rate regimes - Governor's speech

Quarterly Bulletin 1990 Q4
Published on 01 December 1990

Commenting on the background to sterling's entry into the exchange rate mechanism, the Governor reviews post-war experience with both fixed and floating exchange rate regimes, including the ERM. He notes the benefits others have obtained through pursuit of rigourous counter inflationary policy within the framework of the ERM, and expresses his confidence that the United Kingdom too will make a success of membership by maintaining its firm anti-inflation policy.

The Governor goes on to discuss some of the issues in the debate on economic and monetary union in Europe, arguing in particular that monetary union would only be feasible when the individual economies had converged sufficiently no longer to need divergent interest rates. Given that such conditions are a distant prospect, he urges the advantages of the United Kingdom's 'Hard Ecu' proposals as a more practical and attainable way forward.

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