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mpc: 10 In the United States, recent data had been consistent with the view that there had been some recovery following temporary weakness in Q4 2005, and growth in the first quarter of 2006 appeared likely to be in line with the February Inflation Report forecast. Manufacturing and non-manufacturing indices from the Institute for Supply Management, employment and consumption growth, had all been reasonably strong. Capacity utilisation had been slightly above its post-1990 average and the unemployment rate was historically low, average hourly earnings growth had been picking up and headline consumer price inflation was 3.6% in February. However, there were some signs that the US housing market was slowing and that might be followed by a moderation in consumption growth in due course, although the magnitude and the timing of such a link were uncertain. Furthermore, to the extent that the impact of increases in policy rates had previously been attenuated by lower long-term rates, the recent increases in the latter could lead to further restraint on demand growth. Consistent with this uncertainty, implied volatilities for interest rates around five years forward, calculated from options prices, were significantly higher for the United States than for the United Kingdom or euro area.