1.1 Macroeconomic stability
Why is it significant?
A stable macroeconomic climate is essential for business confidence. Investment and long term planning decisions are particularly sensitive to volatile interest rates, high and unstable inflation and unanticipated fluctuations in demand and output.


How does the UK perform?
Historically, the UK economy has performed poorly in terms of macroeconomic stability compared with other G7 countries (chart 1.1). Volatility of economic growth, inflation, exchange rates and interest rates, partly reflecting policy shifts, hindered the long-term health of the economy. However, in recent years the new macroeconomic framework has helped to deliver economic stability and avoid large and destabilising fluctuations in output.