ABSTRACT
In joining the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) in 1990, as well as any benefits to its trade performance, the United Kingdom hoped to secure a stable base for low inflation and sustainable economic growth. Joining would provide an ‘anchor’ which would reinforce anti-inflationary policy, accepting the disciplines that membership involves and removing the temptation to manipulate the economy for political ends which arguably had generated the ‘stopgo’ of the post-war period. It was therefore a highly laudable scheme for John Major to promote as the centre-piece of his economic policy and had the support of all the major UK political actors, of the Bank of England,2 as well as the practical support, if necessary, of the other central banks in the EU. An anchor it turned out not to be. On 16 September 1992, the United Kingdom left the ERM after a period of intense pressure on sterling and considerable political remonstrations.
