The Governor notes that an important influence on the downward movement of yields in the last two years has been the broadly based consensus on the importance of macroeconomic policy discipline. This has been accompanied by sustained expansion of the world economy, although there have been quite marked differences among individual countries. Cyclical differences in short-term interest rate prospects explain differences among yields at the short end of the curve, but longer-term economic performance—and particularly inflation—is not expected to be very different between almost all of the major countries. But a comparison of yields also indicates that some considerable uncertainty remains about the prospect for EMU, in particular about its initial membership, but also about the extent of the discipline it will involve.
Bond yields and macroeconomic behaviour