Operation of monetary policy

• Economic and monetary statistics released in the first quarter indicated continued moderate growth without an increase in inflationary pressures.
• Against this background, and re-assessing the possible impact in April of Budget measures that constituted a marked tightening of the fiscal stance, interest rates were lowered by 1/4% on 8 February.
• The timing and size of the move surprised the markets and led to a weakening in sterling, and in the gilt-edged and equity markets. In turbulent international conditions, there were sharp falls in almost all world bond markets, but gilt yields rose more than yields elsewhere.
• The Bank maintained a broadly neutral stance in its official money-market operations. Technical conditions in the money markets tightened in late February and early in March, but the new repo and secured loan facilities helped to ease the strains.

Operation of monetary policy