Misplaced hopes for the pound

Article Abstract:

The United Kingdom chancellor, Gordon Brown, has refused to try to push down the value of pound sterling, arguing that the government does not have a reliable way of doing so. Interest rates are being used to control inflation, rather than to control the value of the pound. The rise in value of pound sterling is linked to a wider spread between UK and German interest rates from Jan to May 1999, as well as to a stronger UK economic performance than in some parts of mainland Europe. The UK's trade deficit for 1st qtr 1999 is low at a time of low unemployment, and high world stock prices tend to be linked to a high value for the pound.

Exchange Rates, Foreign Exchange & Reserves Policy

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Mr Clarke grabs a tiger by the tail

Article Abstract:

Pound sterling has risen in value in 1996. This is linked to the deliberate weakening of the Japanese yen and German mark, and greater optimisim that European monetary union will be carried out. The rise in the value of the pund has lessened the need for a rise in interest rates since economic activity is depressed by currency appreciation. The problem is that inflation is more of a threat in services than in manufacturing industry geared to exports, which will most be hit by the currency appreciation.

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UK economy: price surprise

Article Abstract:

UK inflation may be less than forecast in 1997 and 1998, according to Salomon Brothers. Retail price inflation may be less than wage inflation if productivity rises and pound sterling remains strong. Sterling is forecast to fall by many economists but this may not occur, especially if there is uncertainty over planned European monetary union. Low inflation may mean that interest rates are not raised but this would mean too high a dependence on exchange rates to control inflation.

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