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mpc: 3 mortgage borrowing over the past year. Part of this might be accounted for by mortgage equity withdrawal, and it would need to be watched. House prices had risen by around 15% during 1999, and intensified competitive conditions in the retail banking industry ­ leading to lower spreads and some new, flexible loan products ­ were making it easier for households to unlock such increases in wealth. That might help to explain stronger-than-expected consumer spending over recent quarters. It might also lend support to expectations that consumption growth would slow, given that house price inflation was now more subdued. 9 The interpretation of developments in the corporate sector's financial position was less clear. Both deposits and borrowing had been growing rapidly since the summer. While the telecom sector had accounted for some of the increased borrowing, this was not the whole story. The non-financial corporate sector was running a deficit of around 1½% of GDP. While considerably below the levels seen in the 1980s, this was a bigger deficit than during most of the 1990s. Corporate sector liquidity nevertheless seemed strong: the stock of corporate deposits was near historical highs as a proportion of the stock of borrowing. It seemed that, in aggregate, firms were borrowing in part to acquire financial assets. It was possible that mergers and acquisitions were having a material effect on the data, but further analysis was needed. In the meantime, it was hard to draw any conclusions about the implications for demand. 10 Sterling's effective exchange rate index had fallen 1% over the month, falling against the dollar and rising against the euro. It had been volatile during the month, having spiked up to about 111 before easing back to around 107 by the time of the meeting. The Committee thought that the most recent levels were more relevant to an assessment of the inflation outlook, and so to policy, than the 15-day moving average (109.3) which, by convention, was typically used as the starting point in its Inflation Report projections. It therefore agreed that the November projections should use the five-day average (107.5) as the starting point, which was about one and a half per cent above the level implied in August's central projection. It would be important to explain in the Inflation Report the reason for the change in presentation in this instance and to show the difference it made to the projections. 11 Most members of the Committee continued to regard the balance of risks to sterling as lying on the downside. In the short term, there was added uncertainty about exchange rates generally given the delayed conclusion of the US Presidential election.