The British Attempt to Manage Long-Term Interest Rates in 1962-64

Abstract

The British monetary authorities tried to encourage lower long-term interest rates through their government debt management operations between 1962 and 1964, consistent with a recommendation of the Radcliffe report. The implementation of the policy was complicated by the need for the Bank of England to act as a market-maker in the government securities market, and beset by misunderstandings between the Treasury and the Bank of England. The policy was quietly abandoned when the conditions of strong market demand for bonds on which it depended changed. The paper describes how the policy was developed and implemented, and the impact of political preferences on it.

Keywords: long-term interest rates, debt management, monetary policy, Bank of England, Treasury, gilts, Radcliffe.

JEL Classification: E52, E58, E65, H63, N24.