Europe's influence on our interest rates cannot be ignored.
The Government, as ministers like to remind us, has, since last autumn, been pursuing a British monetary policy to suit the needs of the British economy. Put like that, the idea is simple enough. During the 23 months that sterling was in the European exchange rate mechanism (ERM), policy became increasingly geared to maintaining the pound at what many would regard as an unrealistic level, to the detriment of conditions at home. Since leaving the ERM, the balance has shifted almost entirely the other way.
It is easy, when living through it, to regard the highly unusual as commonplace. But one does not have to stand back too far to see the special nature of present circumstances. Britain's British monetary policy is a rarer animal than first appears, for two reasons.