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 May to 3 August 2001.
• Private sector forecasts for short-term growth prospects in the G7 countries were revised down further during the review period and world equity prices fell.
• Official interest rates were lowered by 75 basis points in the United States, by 50 basis points in the United Kingdom and by 25 basis points in the euro area. There was no change in the stance of Japanese monetary policy.
• Short-term interest rate expectations fell sharply in the United States and the euro area. In contrast, they rose and then fell back again in the United Kingdom and were broadly unchanged in Japan. Uncertainty about the outlook for short-term interest rates generally remained at higher-than-average levels.
• Long-dated government bond yields were quite volatile in all the major markets. Over the period as a whole, yields fell in the United States and the euro area but were broadly unchanged in the United Kingdom and Japan.
• Exchange rate movements were relatively small over the period as a whole; the dollar appreciated despite greater falls in US interest rates than elsewhere.

Markets and operations