Summary of Quarterly Bulletin
2007 Q4

Markets and operations (1.8mb)
This article reviews developments in global financial markets since the 2007 Q3 Quarterly Bulletin up to the end of November. The article also reviews the Bank's official operations during this period.

Research and analysis
Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank or of MPC members.

Household debt and spending: results from the 2007 NMG Research survey (521k)
(By Matt Waldron of the Bank's Structural Economic Analysis Division and Garry Young of the Bank's Monetary Assessment and Strategy Division.) This article summarises the main results from the latest survey carried out for the Bank by NMG Research in late September about the state of household finances. There was a slight increase in financial pressure among renters, continuing a recent trend. Mortgagors appeared not to have experienced any increased difficulty despite the increase in policy rates over the year. Partly, this reflects the widespread use of fixed-rate mortgage products. Credit conditions appeared to have tightened a little for renters, but loosened for mortgagors over the year to September.
The raw survey data are available in Excel format (1.7mb)

The macroeconomic impact of higher energy prices on the UK economy (670k)
(By Richard Barwell of the Bank's Conjunctural Analysis and Projections Division and Ryland Thomas and Kenny Turnbull of the Bank's Structural Economic Analysis Division.) This article explores the macroeconomic impact of the rise in energy prices since 2004. The article discusses the various channels through which rising energy prices are likely to influence the degree of inflationary pressure in the UK economy. Rising energy costs put upward pressure on the prices of energy-intensive goods and services, and can affect both aggregate demand and potential supply. The adjustment of prices and quantities in the labour market are particularly important in this regard. Ultimately though the impact on inflation will depend on monetary policy and the behaviour of inflation expectations. Some past episodes in which energy prices increased sharply preceded a marked deterioration in the macroeconomic environment. The evidence so far suggests a more muted impact on the economy than in these previous cases.

Decomposing corporate bond spreads (1.5mb)
(By Lewis Webber of the Bank's Systemic Risk Assessment Division and Rohan Churm of the Bank's Conjunctural Assessment and Projections Division.) Sterling, dollar and euro-denominated corporate bond spreads narrowed substantially between late 2002 and mid-2007, but widened abruptly during the recent financial market turmoil. This article uses a structural credit risk model to examine the extent to which movements in spreads over the past decade have been driven by credit and non-credit related factors. Compensation for bearing non-credit related illiquidity risk appears to have been a particularly important driver of high-yield spreads, including during the recent financial market turmoil, but the compensation required for credit risk has also increased recently.