One crucial aspect for significantly raising foreign investment inflows will be the central bank’s ability to maintain a more flexible inflation-targeting regime allowing market forces to set the exchange rate. The uneven policy-making environment since October 2022 suggests that this process may not be smooth, with limited fluctuations of the pound since the 6 March devaluation suggesting central-bank intervention in currency markets.
If the authorities aim only to continue managing the value of the pound at lower levels instead of allowing the currency to fully float, this may fall short of IMF conditions for future disbursements and complicate co-operation…
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