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mpc: 4 work, the more fundamental influence was probably the deceleration in world activity, and the expectation that the demand for oil would slow, at least in the near term. If sustained, the fallback in oil prices would reduce the upside risks to inflation, and moderate the decline in the prospects for world economic growth. 13 The Committee noted the significant fall in money market and government bond yields in the major industrial economies over the past month. The movements in short yields could be explained by cyclical factors, and the falls in longer yields did not seem to result from changes in inflation expectations; they might instead reflect a widespread downgrading of longer-term growth prospects. 14 If the world economy slowed by more than projected in the November Inflation Report, there would be a negative impact on UK growth, and hence on inflation. If the slowdown led to downward pressure on the prices of commodities and other imports, this would restrain inflation further. But if a sharper-than-expected slowdown in the United States led to a fall in the dollar against the euro, the overall impact on the United Kingdom would depend on how sterling reacted to such a move. If, for instance, it rose against the dollar, but fell back against the euro, then the much greater importance of the euro area for UK trade might mean that sterling's effective exchange rate would fall. This would tend to offset, at least in part, the dampening effect on UK prices and activity that would otherwise result from slower growth in world demand.

Money, credit and asset prices

15 Growth in M4 remained strong, although the twelve-month rate had fallen back to 6.6% if deposits by other financial corporations (OFCs) were excluded. Similarly, growth in M4 lending remained robust at 13.2%, but excluding OFCs had fallen back to 11.6%. Lending to private non-financial corporations (PNFCs) had risen by almost 16½% over the past year. 16 M4 lending to households continued to grow at close to 10% a year, with unsecured lending still growing much faster than this. Annual growth in secured lending was little changed, at almost 8%. While on a year-on-year basis the rate of increase in house prices continued to fall on most measures, over a shorter horizon some of these measures showed a pick-up in growth over the past few months. Provisional data from the Royal Institution of Chartered Surveyors' (RICS) survey for November suggested an increase in the balance of estate agents reporting rises in house prices over the past