mpc.theyserveforyou.com

mpc: 3 8 The Committee agreed that while the downside risks to growth in the United States, acknowledged in its November projections, had increased over the past month, the most likely prospect was still for moderate growth rather than recession. 9 Within the euro area, GDP growth was likely to be lower in Q3 than in the previous quarter. The purchasing managers' indices in Germany and France had continued to fall, although these remained above the neutral 50 level. At the same time, consumer price inflation remained well above 2%, and the core inflation measure had risen to 1.5%. The recent fall in oil prices, if sustained, might reduce inflationary pressures in the euro area while helping to support domestic demand. If the euro exchange rate recovered against the dollar in response to slower growth in the United States, this would also help to contain inflation, although it would adversely affect the contribution to growth from net trade, which was likely to be influenced in any case by the slowdown in the world economy. 10 In Japan, GDP growth remained anaemic, at 0.2% in Q3, with the figure for Q2 having been revised down from 1.0% to 0.2%, following changes to the methodology used to produce the national accounts. Equity prices and bond yields had fallen, perhaps suggesting some faltering in expectations of a recovery in domestic demand. The export sector was vulnerable to any sharp slowdown in world demand, or a significant depreciation of the dollar against the yen. 11 There had been signs of fragility in Argentina and Turkey over the past month, but these appeared to reflect the particular circumstances in these countries; so far markets seemed to be differentiating between the emerging market economies more than in 1997 and 1998. Nevertheless, there was a risk that if growth in the United States, and in world trade more generally, slowed by more than expected, the emerging market economies as a whole might be more significantly affected. Within this group, equity prices in Asia had fallen steeply, and the (very rapid) growth rates in industrial production there had begun to moderate; this area was heavily dependent on exports of electronic goods to the United States. Nevertheless, Consensus GDP growth forecasts for these countries in 2001 had been revised down only a little, and their external liquidity positions were in most cases more firmly based than they had been in 1997. 12 The spot price for oil had fallen by around 10% over the past month, but it remained volatile and longer-dated futures prices had declined by less. While there were various short-term factors at