Commentary: Problems of a marked man

Poor Norman Lamont. No sooner does he come up with a new wheeze to boost the embattled pound than an unforeseen spanner lodges in the works. Last Thursday's announcement of a pounds 7.25bn foreign currency loan was rapturously received, only for dismal US employment figures quickly to deflate the euphoria. His statement on the Treasury steps a week earlier - combined with the most public support buying of sterling since the 1970s - was almost scuppered when a Bundesbank backwoodsman mentioned merely 'the potential for realignment'.

And now the Finns. The temporary flotation of the markka has prompted a flight to the German mark and put the pound back under pressure. It has unravelled Mr Lamont's attempt to persuade the markets that German interest rate policy had changed following last weekend's Ecofin meeting in Bath.

In fact the markets were already beginning to see through the Bath ploy by close of play on Monday - and the Bundesbank president rammed home the point yesterday. The Bundesbank said in Bath that it saw no reason to increase interest rates 'in present circumstances' but there was no room to reduce rates yet. It should have been self-evident that this was the Bundesbank's position: its council meeting on Thursday had left policy unchanged, demonstrating that only two days before it thought rates should remain the same.

Mr Lamont claimed Bath was the first occasion on which the Bundesbank had 'openly and publicly' said rates should not rise. But we are actually none the wiser where German rates will go than we were at the end of last week. They have probably peaked, but would doubtless be increased again should German inflation or money supply growth accelerate unacceptably. Mr Lamont's officials would need their most spectacular wheeze yet to cope with that eventuality.