This article reviews developments in international and domestic financial markets, drawing on discussions with the Bank of England’s market contacts, and describes the Bank’s market operations in the period 30 June to 6 October 2000.
- Official interest rates were raised in the euro area by 50 basis points during the review period, and were left unchanged in the United States and United Kingdom.
- Short-term interest rate expectations for 2000–02 were largely unchanged in the euro area, but were revised down by around 30 to 60 basis points in the United States and the United Kingdom. An increasing number of market participants believed that official rates in the United States and the United Kingdom had peaked.
- The US and UK government bond yield curves became less inverted. The German government bond yield curve shifted upwards slightly during the period.
- Volatility in the money and bond markets diminished in Q3 and uncertainty about the short-term outlook for interest rates remained at historically low levels.
- World equity markets weakened during the period, but the volatility seen in stock prices in Q1 and Q2 diminished in Q3.
- The dollar appreciated further against all the other major currencies, while the euro continued to depreciate. On 22 September the G7 central banks intervened in the foreign exchange markets, buying euros.
Markets and operations