ABSTRACT
This chapter has a number of objectives of which the first is to update the account of monetary policy given above. This is provided in section 11.2 which covers the period from the autumn of 1981 until the end of Mrs Thatcher’s first term of office in June 1983. During this period the exchange rate twice came under sustained downward pressure. This produced a potential conflict between the internal and external targets of policy which had been absent for several years. Moreover, the authorities were no longer satisfied with a single monetary target as their major policy weapon for other reasons. Indeed this unhappiness had been apparent since the autumn of 1980, but it intensified in the period under review. One response was the adoption of ‘multiple targets’, similar to those advocated above, in the 1982 Budget and to considerable emphasis being given in official speeches to a range of ‘considerations’ besides money which affected monetary policy. Such references were common from the autumn of 1980 onwards, the first being in the Chancellor’s speech referred to on p. 194. Hence for a number of reasons the intermediate target of monetary policy was subject to continuous review. The issues underlying this are analysed in section 11.3. During the period major changes in the techniques of monetary control occurred in the field of debt management. These were evolutionary rather than revolutionary in that they continued the innovative and imaginative policy which had been adopted for several years. Nevertheless the overall effect of these changes was great. In his 1983 Budget speech, Sir Geoffrey Howe claimed that these were among the major achievements of his period as Chancellor, second only to the reduction of inflation. These changes are discussed in section 11.4.
