World activity is expected to recover, although uncertainties continue to surround growth prospects in the United States, and these have led to some easing of policy in recent months. Continuing modest progress on inflation has also permitted policy easing in other major countries. The most notable exception is Germany, where the effects of reunification are still being felt. In the United Kingdom, interest rates have fallen by 4 ½% since entry into the ERM and by ½% since the publication of the last Bulletin. Official statistics suggest that output stopped falling in the summer. Recent data suggest that a modest recovery may have already begun.