mpc.theyserveforyou.com

mpc: 4 on 25 year corporate bonds had also fallen relative to yields on shorter maturity bonds, reflecting movements in similar maturity gilt yields. And it was noticeable that there had been a sharp pick up in issuance of very long corporate bonds (with a maturity in excess of 15 years) over this period. So any technical factors that may have helped to explain the fall in relative gilt yields at the long end appeared to have reduced the funding costs for some firms. A17 The pass-through of September's base rate rise to retail savings rates had remained incomplete in October. Interest rates on fixed-rate mortgages had increased, following continued increases in swap rates at all maturities. But the narrowing in the spread of five-year fixed mortgage rates over five-year swap rates observed this year had continued in October. A18 Implied inflation expectations had fallen by around 15-30 basis points out to fifteen years. The fall had been smaller at longer maturities. The October biannual Consensus Economics survey had pointed to a fall in inflation expectations over the medium to long term (four years and further out) between April and October. By contrast, over the same period, inflation expectations implied using index-linked gilts had risen out to eight years, though they had fallen further out. A19 The sterling effective exchange rate index (ERI) had appreciated, by 0.7% over the month. Within this, sterling had appreciated by 1.4% against the euro, but had depreciated by 0.7% against the US dollar and by 3.0% against the yen. Real exchange rate expectations calculated using the biannual Consensus Economics survey of long-run inflation and nominal exchange rate expectations had suggested that the markets increasingly expected the strength of sterling to be sustained. The real exchange rate expected at end-2003 had increased by 2.8% between the October 1998 and 1999 surveys. The FTSE All-Share index had risen by 2.4% on the month. As in recent months the index for smaller capitalisation stocks had performed more poorly, falling by 0.8% on the month.

III Demand and output

A20 The preliminary ONS estimate of GDP growth in 1999 Q3 had been 0.9%, the strongest for two years. The annual growth rate had risen to 1.8%. Service sector output had grown by 1.0% in Q3 and had been 2.6% up on a year earlier - close to its long run average. Within services, the distribution, hotels and catering sector had grown by 0.9%. Manufacturing output had risen by 1.0% in Q3, following revisions to data in July and August.