- Market interest rates rose in the United States, in response to stronger-than-expected economic growth and in anticipation of the Federal Open Market Committee’s decision on 24 August to increase the Federal funds target rate by 25 basis points.
- The United Kingdom’s yield curve also shifted upwards in response to stronger-than-expected activity indicators and, on 8 September, the Bank of England’s repo rate was increased by 25 basis points.
- In the euro area, official interest rates remained unchanged during the period. Nevertheless, market-based measures of interest expectations rose; three-month rates implied by euribor futures contracts increased by around 35–75 basis points. In contrast, market interest rates fell in Japan.
- Expectations of increases in official interest rates and concerns about equity valuations in some countries led to falls in equity indices in the United States, the euro area and the United Kingdom. Partly linked to these developments, the US dollar’s exchange rate index depreciated by 5%, while that of the yen appreciated by 11%.
- On 31 August, the Bank of England permanently extended the range of securities eligible for use in its repo operations. And on 20 September, the Bank announced a new temporary longer-term repo facility. Both actions will help to promote orderly conditions in the sterling money markets over the period spanning the Millennium date change.
Published on
01 December 1999
Markets and operations