Inflation Report
August 2006
Money and asset prices
Chart 1.1 Cumulative changes in international equity prices since
4 January 2006(a)
Sources: Bloomberg and Thomson Financial Datastream.
.
(a) In local currency terms.
(b) Morgan Stanley Capital International (MSCI) index
Chart 1.2 International broad money(a)
Sources: Bank of England, Bank of Japan, Board of Governors of the Federal Reserve System and ECB.
(a) The monetary aggregates used are: M4 for the United Kingdom; M2 for the United States; M3 for the euro area; and M2 + CDs for Japan.
Chart 1.3 Market implied volatility of the FTSE 100 over the next
three months(a)
Sources: Bank of England and Euronext.liffe.
(a) Three-month implied volatility derived from option prices.
Chart 1.4 Nominal long-term interest rates(a)
Sources: Bank of England and Bloomberg.
(a) Ten-year instantaneous forward rates.
Chart 1.5 Official Bank rate and one-day forward curves(a)
Sources: Bank of England and Bloomberg.
(a) Forward rates are interest rates expected to prevail in a future period. They are derived from instruments that settle on the London interbank offered rate (Libor). That includes market rates on short
sterling futures, swaps, interbank loans and forward-rate agreements. The forward curves shown in the chart are fifteen-day averages of one-day forward rates. The curves have been adjusted for credit
risk.
Chart 1.6 Overseas official and forward interest rates(a)
Sources: Bank of England and Bloomberg.
(a) These are one-month forward rates. The US, euro-area and Japanese curves have been derived from instruments that settle on dollar Libor, Euribor and yen Libor respectively. These curves
have not been adjusted for credit risk.
(b) Official rate refers to the Bank of Japan’s target for the uncollateralised overnight call rate.
Chart 1.7 Cumulative changes in effective exchange rate indices
since 2 January 2006
Chart 1.8 UK broad money
(a) Other financial corporations.
Chart 1.9 Lending available for consumption
(a) The sum of mortgage equity withdrawal and consumer credit.
(b) The 2006 Q2 outturn for consumer credit is not shown because household income data have not yet been published for that period.
Chart 1.10 Employers’ social contributions
(a) Includes National Insurance, pension and other social contributions by employers.
(b) Excludes imputed pension contributions by government. The official series starts in 1987.
Tables
Table 1.A Indicators of house price inflation(a)
HBF current balance(b)
RICS current balance(c)
RICS expectations balance(c)
Lenders’ indices(d)
Average
2005
2006
since 2000
Q3
Q4
Q1
Q2
July
25
16
14
1.0
-17
-24
-1
0.6
-4
2
17
0.6
8
12
24
0.8
20
21
32
0.2
n.a.
n.a.
n.a.
0.5
Sources: Bank of England, Halifax, Home Builders Federation (HBF), Nationwide and Royal Institution of
Chartered Surveyors (RICS).
(a) All series are net percentage balances except the lenders’ indices. Averages of monthly data where relevant.
(b) Compared with previous month. These data have been seasonally adjusted by Bank staff.
(c) Change during the past three months or expected over the next three months.
(d) Average of monthly percentage changes in the Halifax and Nationwide house price indices.
The impact of pension fund
deficits on company behaviour
Chart A Distribution of respondents’ pension fund deficits
(a) Individual responses have been weighted by turnover.
Chart B Impact of pension deficits on respondents’ past and future
business decisions
(a) Individual responses have been weighted by turnover.
Chart C Impact of pension deficits on investment by respondents(a)
(a) ‘Small’ refers to companies with an annual turnover of up to £50 million; ‘medium’ to companies with annual turnover of between £50 million and £500 million; and ‘large’ to companies with
annual turnover in excess of £500 million. Individual responses have been weighted by turnover within the small/medium/large categories.