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mpc: 2 Financial market developments over the past month appeared to have been consistent with the economic news. Sterling short-term market interest rates had fallen over the month in response to data for consumption and the housing market. These rates were still slightly higher, however, than at the time of the February Inflation Report. Implied forward rates for December 2005 had fallen, by around 20 basis points, and a further quarter-point rise in the repo rate was no longer fully priced into the yield curve. According to the Reuters survey of economists, the mean expectation for the Bank's repo rate at the end of the year was 4.85%, the same as last month. In the United States, in contrast, short-term market interest rates and implied near-term forward rates had risen further over the past month, reflecting generally strong data and the Federal Open Market Committee's (FOMC's) latest statement. The US dollar yield curve suggested that market participants expected quarter-point interest rate increases at most FOMC meetings during the rest of this year. Euro short-term market interest rates had increased only slightly, and the market curve was pricing in one increase in the policy rate later this year. Long-term nominal forward interest rates had fallen a little on the month both here and abroad, but remained around 25 to 50 basis points higher than at the time of the February Inflation Report. Part of that rise since February might be explained by a rise in inflation expectations or the inflation risk premium in the US and UK bond markets, judging by a comparison of the prices of traditional and index-linked bonds. But real interest rates were also higher, accounting for much of the increase.