| Abstract: | With the election out of the way and signs of recovery tentatively in place, the Government is likely to take steps to bring the economic and political cycles back into kilter so that it does not have to fight the next election under the handicap of recession. This suggests that its first priority will be to consolidate the progress on inflation with a tight fiscal and monetary stance, deferring until 1993-4 any significant relaxation of policy. Holding the exchange rate close to its present parity will therefore take priority over interest rate cuts which may have to wait on a lead from the Bundesbank. On fiscal policy the aim will be to reduce the budget deficit, which suggests a tough approach to public expenditure in this year's spending round. |
