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City: No credibility

Jeremy Warner
Saturday 13 February 1993 19:02 EST
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IN WARNING against further cuts in interest rates last week, Eddie George, Governor-elect of the Bank of England, also criticised 'supposed pundits' in the financial markets who complain that the Government's economic and monetary policies lack credibility. The result of his comments? A further nosedive in the pound. As far as the markets are concerned, the pundits clearly still have more credibility than Mr George.

Nor could Norman Lamont's apparent backing for Mr George's position - on Friday, he said there was no room for further cuts in rates - nor the best inflation figures in 25 years halt sterling's ever-downward plunge. The truth is that nobody knows any longer what the Government's policy is on either interest rates or the pound. Mr Lamont and John Major appear to be at loggerheads over the issue, with Mr Major favouring further cuts in rates and Mr Lamont fearful of their inflationary consequences. It's no use them denying such a rift. Such is the City's present disillusionment with the Government that they are not believed anyway.

The Prime Minister should have heeded advice and moved Mr Lamont from No 11 as soon as his credibility was shattered by last autumn's ERM crisis. To have allowed him to stagger on like this is both damaging and unnecessary. The sooner the Budget is over and Mr Lamont is moved to another job, the better for everyone.

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