Operation of monetary policy

• Economic statistics in the fourth quarter of 1993 (especially those released in November and December) tended to reinforce an impression of steady growth and low inflation in the British economy.
• In view of the improved prospects for low inflation, and taking account of the planned Budget measures, a 1/2% interest rate cut was implemented on 23 November.
• The interest rate cut and the Budget, along with the improving UK economic statistics, were well received in the markets: sterling strengthened, gilts and equities rallied to new highs, and expectations for nominal interest rates and inflation declined.
• The Bank maintained a generally neutral stance in its market operations, but was less accommodating in the first half of December when the market began to anticipate an early further cut in rates in the wake of the Budget.

Operation of monetary policy