INFLATION
THE loss during July of a further 136 million dollars from the sterling area's central reserves fully confirms the forecasts of the pessimists. This is one of the worst monthly results for well over three years, and as no special payments of any size were made it can only be explained as the consequence of a world-wide loss of confidence in sterling. A substantial drain was of course expected. From the beginning of July until the Chancellor's statement on July 25 the Bank of England had to support the sterling dollar rate by selling dollars from the reserves nearly every day. Though there was an improvement in the sterling rate during the last five days of the month, this did not give the authorities much time to recoup their losses. Already in the first few days of August there are signs that the recovery in the strength of sterling has spent itself. As this month is one in which some loss of dollars is expected as a normal reflection of the seasonal trends in international trade, the immediate outlook for sterling is not promising. All this adds to the anxiety which most people felt about the Chancellor's statement last week. It is difficult to be convinced that this really measured up to the occasion. How- ever, there is a bright side to this news. The July figures have put an end to the complacency in high quarters which delayed the diagnosis of our troubles to such a late hour. One gathers that more and more people in the Government machine are gradually overcoming their distaste for the word 'inflation' and are even prepared to admit that it may sometimes be associated with rising prices. This is very salutary.
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