Exchange rate realignments

Exchange rate realignments became less frequent after 1983, and from 1987 until 1992 they ceased altogether. During this period, the ERM acquired a more ambitious objective—holding down inflation throughout the system.


To accomplish this, the ERM was made more rigid and member currencies were locked to the ECU or, for all intents and purposes, to the strong deutsche mark. This more rigid system enjoyed early success, and inflation rates fell sharply in the member countries of the ERM.


However, the role of the ERM in this drop is questionable, as inflation also fell in industrial countries outside the ERM such as the United States and the United Kingdom. Even so, bringing down inflation was an important motive behind the United Kingdom’s decision to enter the ERM in 1990 and in Italy’s decision in the same year to narrow its band of fluctuation from 6 percent to 2.25 percent.