Markets and operations

• This article reviews developments in international and domestic financial markets, drawing on information from the Bank of England’s market contacts, and describes the Bank’s market operations in the period 1 February to 11 May 2001.
  
  
• Private sector forecasts for short-term growth prospects in the G7 countries were revised down during the period. World equity markets fell sharply until late March but recovered somewhat thereafter.
  
  
• Official interest rates were reduced by 100 basis points in the United States, by 75 basis points in the United Kingdom, and by 25 basis points in the euro area. The Bank of Japan also eased its monetary policy during the period.
  
  
• Short-term interest rate expectations fell in the United States, the United Kingdom and Japan, but were broadly unchanged in the euro area. Uncertainty about the short-term outlook for future changes in monetary policy increased in these areas.
  
  
• US and European government bond yields beyond two years’ maturity rose as market participants became more confident that the reductions in official rates would limit the extent of the global slowdown.
  
  
• The dollar appreciated against the other major currencies during the period.

Markets and operations