mpc.theyserveforyou.com

mpc: 13 based on annualised hours, many contacts suggested that the introduction of these types of contract was planned for the future.

VII Market intelligence

A52 Short-term interest rate expectations had fallen further since the previous meeting of the Committee. Rates implied by short sterling futures contracts, for example, had decreased by 10-17 basis points for contracts maturing in 2000-02. The main factors leading to lower interest rate expectations during the period included September's announcement of an unchanged Bank repo rate, and data on average earnings, industrial production and the CBI Distributive Trades survey, which were all weaker than the market had expected. Most market participants expected the MPC to leave the repo rate unchanged in October; economists in a Reuters poll had attached a 70% probability, on average, to such an outcome. In reaching these views, market participants had referred to the more benign price and earnings data, the expected slowdown in domestic activity (partly arising from oil price increases) and lower equity prices. Others believed that the economy was still growing robustly and that the arguments were finely balanced. A53 The sterling exchange rate index (ERI) had fallen in the first half of the period and then appreciated in the second half, to finish 1.2% higher at 108.0. The strength of the dollar against most other currencies in the first half of the month was a major factor in explaining sterling's initial depreciation. Sterling reached a 14-year low against the dollar, leading some market participants to question whether the recent strong correlation with the dollar had weakened, though neither short- term nor long-term implied correlations (derived from foreign exchange options contracts) had suggested this. The sterling ERI had more than reversed its fall in the second half of September, mainly reflecting an appreciation against the euro. This movement was related, at least in part, to actual and expected merger and acquisition activity. Coordinated G7 intervention on 22 September had supported the euro. Following the intervention, prices of euro call options had become more expensive relative to euro put options, suggesting that market participants had become more confident that the euro would appreciate rather than depreciate against the dollar.