| Objective | Impact? | |
|---|---|---|
| Growth | ||
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In principle the weaker pound will make UK exports cheaper in terms of foreign currency and imports cheaper in sterling terms. Therefore there should be an increase in X and a fall in M, increasing Ad and promoting short term growth. However, PED for both may be low in the short term, because of factors such as loyalty to suppliers and contracts, and export performance will depend on the nature of exports and export markets. Hence there is a risk that, especially in the short run, the value (in total) of imports may actually rise sharply, damaging growth.
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| Unemployment | ||
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As noted in growth, in principle, exports should rise and firms competing with imports should also see an upturn in demand, but it depends on many factors as noted in growth. Import-dependent firms, for example may face job losses.
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| Inflation | ||
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There should be unequivocal upward pressure on inflation. The decrease in Px will increase demand in export sectors and the rise in Pm will create cost-push pressures elsewhere.
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| Trade balance/current account | ||
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Should in principle improve in the longer run, but see the section on growth.
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