Markets and operations 1999 Q2

• The euro was successfully launched on 4 January.
• Euro-denominated bond issuance was heavy during the first quarter.
• Economic indicators in the euro area were generally disappointing, and the euro exchange rate weakened over the quarter. After the end of the quarter on 8 April, the European Central Bank (ECB) announced a cut in interest rates of 50 basis points to 2.5%.
• Economic indicators in the United States were unexpectedly strong, and market expectations of the path of US interest rates were revised upwards, but there was no change in the official target for the federal funds rate. Equity prices rose further.
• Japanese monetary policy was eased and public debt management policy was modified. Bond prices were volatile and equity prices rose.
• In the United Kingdom, the Bank of England’s repo rate was reduced on two occasions during the quarter, by a total of 75 basis points, to 5.5% (and by a further 25 basis points on 8 April).
• Implied future sterling short-term interest rates fell over the quarter, but the implied short-term interest rate curve became

Markets and operations