Inflation Report May 2009

Money and asset prices

Chart 1.1 Bank Rate

Chart 1.2 Money and nominal GDP (a) At current market prices. (b) This measure excludes the bank deposits of, and borrowing by, intermediate OFCs. These OFCs are: mortgage and housing credit corporations; non-bank credit grantors; bank holding companies; and those carrying out other activities auxiliary to financial intermediation. Banks’ business with their related ‘other financial intermediaries’ is also excluded, based on anecdotal information provided to the Bank by several banks.

Chart 1.3 Cumulative APF asset purchases by type

Chart 1.4 Monthly changes in gilt holdings by sector (a) Sources: Bank of England and Debt Management Office. (a) Non seasonally adjusted. (b) Changes in sterling holdings of all securities issued by public sector. (c) Net issuance by the Debt Management Office.

Chart 1.5 Nominal spot gilt yields Sources: Bloomberg and Bank calculations.

Chart 1.6 Property prices Sources: Halifax, Investment Property Databank, Nationwide and Thomson Datastream. (a) Commercial property prices are indexed to their peak in June (b) The average of Halifax and Nationwide measures. The published Halifax index has been adjusted in 2002 by the Bank of England to account for a change in the method of calculation. House prices have been indexed to their peak in October 2007.

Chart 1.7 Three-month interbank rates and spreads relative to future expected policy rates Sources: Bloomberg and Bank calculations. (a) Three-month Libor spread over equivalent-maturity overnight index swap (OIS). Dashed line shows the average forward spreads derived from forward rate agreements over the fifteen working days to 6 May 2009.

Chart 1.8 Contributions to growth in loans to UK private non-financial corporations (PNFCs) (a) (a) Annualised percentage changes in sterling and foreign currency loans over the past three months. (b) This group comprises Banco Santander, Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland. (c) Calculated as a residual.

Chart 1.9 Contributions to growth in net secured lending to households (a) (a) Annualised percentage changes over the past three months. Excludes lending to housing associations. (b) This group comprises Banco Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland. (c) Calculated as a residual.

Chart 1.10 Debt issuance by UK PNFCs (a) (a) Three-month average flows of sterling and foreign currency funds raised from corporate bond and commercial paper markets.

Chart 1.11 Investment-grade industrial sterling corporate bond yields and spreads (a) Source: Merrill Lynch. (a) Calculated using an index of bonds with a rating of BBB3 or above. The bonds used to calculate these series change from month to month. This can potentially cause sharp movements at month ends if spreads on bonds leaving or entering the index are materially different to those on other bonds in the index. For example, the sharp narrowing in the spread on 31 March largely reflects such a change. (b) Option-adjusted spread over government bonds.

Chart 1.12 Housing market activity Sources: Bank of England and Royal Institution of Chartered Surveyors. (a) Net percentage balance of respondents saying that enquiries had increased over the previous month, less those saying enquiries had decreased.

Chart 1.13 Quoted mortgage rates and Bank Rate (a) On mortgages with a loan to value ratio of 75%. (b) Monthly average.

Chart 1.14 International equity prices (a) Sources: Bloomberg and Thomson Datastream. (a) In common currency (US dollar) terms.

Chart 1.15 Sterling exchange rates

Chart 1.16 Sterling ERI and Consensus expectations (a) Sources: Bank of England and Consensus Economics. (a) Expectations for the ERI are derived from bilateral US dollar, euro and yen exchange rates, weighted by UK trade shares in Expectations are for year ends.

Tables

Table 1.A Effective interest rates on borrowing by PNFCs Per cent Sep. Dec. Mar. New business (a) Fixed Variable Outstanding stock (b) Fixed Variable Overdrafts (a) Weighted average of interest rates paid on new loans. (b) Weighted average of interest rates paid on outstanding balances of all loans.

Table 1.B Lending to individuals Annualised percentage changes on three months earlier Averages (a) to Jan. Feb. Mar. Total lending Secured Consumer credit of which, credit card of which, other unsecured (a) Averages of end-quarter observations.

Broad money

Chart A M4 and M4 excluding intermediate OFCs (a) See footnote (b) to Chart 1.2.

Chart B M4 excluding intermediate OFCs (a) (a) See footnote (b) to Chart 1.2. (b) Calculated as a residual. (c) Includes insurance companies and pension funds, money market mutual funds, investment and unit trusts and activities auxiliary to financial intermediation placed by fund managers.

Monetary policy and asset purchases

Chart A Stylised transmission mechanism for asset purchases