The end of hostilities in the Gulf removed a major uncertainty from the world scene. It has been followed by a rise in measures of consumer confidence and a rally in stock markets. This optimism, however, has yet to be reflected in higher levels of activity. In the major economies, growth is more subdued than had been expected at the turn of the year, while the inflation outlook is only a little more promising. In the United Kingdom the recession has been deeper than anticipated, but a recovery in activity may be in prospect. Interest rates have been reduced to their lowest level since November 1988, and the headline rate of inflation has started to fall rapidly.