● UK official interest rates were increased twice in the third quarter: the Bank’s Monetary Policy Committee raised the Bank’s repo rate by 0.25 percentage points on 10 July and 7 August.
● The UK money and gilt markets have been active: short-term interest rate expectations and longer-term inflation expectations have fallen in the past quarter.
● The UK yield curve, which was upward sloping at the beginning of the quarter, moved to being downward sloping at the short end. Market views about the short-term interest rate outlook and, in the longer term, entry into EMU, and a reduced potential supply of gilts, were contributory factors.
● The sterling effective exchange rate depreciated by 1.7% in the quarter, with a larger fall against the dollar than against the Deutsche Mark.
● Gilt sales were £7.3 billion in the quarter. After six months of the financial year, gilt financing amounted to around 60% of the revised target for the year of £25.1 billion.
Published on
01 December 1997
Monetary operations