This short piece focuses on Charts 1 and 2. The first maps the path taken since 1970 by sterling, as measured by a trade-weighted index, this charted alongside UK Consumer Price Inflation (CPI). In the second, we see the pound’s eventful ebbs and flows plotted against the UK base rate.

By taking a cursory look at either Chart 1 or 2, one sees sterling’s trade-weighted value starting in the top left corner and ending in the bottom right; a picture, it would seem, of an unrelenting and ‘inauspicious’ fall in the pound’s ‘worth’ of over one-third. Well, inspect the graphs more closely and one notices that much happened between the top left corner (c125) and bottom right (c80).

From the ‘70’s through to ‘87, we see whiplashes in sterling and interest rates, as well as elevated inflation. Then, from around ‘87 until the late autumn of ‘92, a relative semblance of stability reins for the currency, and more moderate inflation, albeit far from entirely modest (Chart 1). These metrics can be seen, however, to have come at the literal expense of high nominal interest rates (Chart 2). This was a period which of course captured (sic) the pound’s imprisonment within the ERM, which, though formally joining in ‘90, it had been a shadowy participant for some three years before, ‘thanks’ to the insistence of the then Chancellor Nigel Lawson.

A mere glance at sterling over the period from Q3 ‘92 cannot fail to put into sharp focus its three sudden plunges. These reflected, respectively, the distinct events of: