1 UK MONETARY POLICY: THE INTERNATIONAL CONTEXT Rachel Lomax Deputy Governor, Bank of England APCIMS Annual Conference 17 October 2005

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3 UK import prices Total imports Total goods imports excluding oil Total goods imports Index 2002 = 100 Source: ONS

4 World GDP * and UK policy rates Source: IMF, Bank of England calculations Per centPercentage change on a year earlier World GDP * (lhs) Policy rate (rhs) * Weighted by UK export shares

5 World GDP *, UK final domestic demand and UK policy rates Source: ONS, IMF, Bank of England calculations Per centPercentage change on a year earlier Policy rate (rhs) World GDP * (lhs) Final domestic demand (lhs) * Weighted by UK export shares

6 World GDP growth Source: IMF, Bank of England calculations Percentage change on a year earlier PPP weighted UK trade weighted

7 Contributions to World GDP growth World GDP (PPP Weighted) ROW China Euro Area US Percentage change on a year earlier World GDP (UK Trade Weighted) Percentage change on a year earlier ROW China Euro Area US Source: Bank of England calculations

8 Oil prices – real and nominal Deflated by M6 export prices* Nominal $ per barrel Source: Datastream, Bank of England calculations*M6 = G7 countries excluding UK

9 Contributions to oil demand growth Source: IEA Rest of the world Europe US China Forecast Percentage change on a year earlier

10 Oil price uncertainty $ per barrel Futures curve, 10 October 2005 Source: Bloomberg, Bank of England calculations WTI spot price

11 Oil price uncertainty $ per barrel Futures curve, 10 October 2005 Source: Bloomberg, Bank of England calculations WTI spot price Range of Consensus forecasts for January 2006 and October 2006 taken on 10 October 2005

12 Oil price uncertainty $ per barrel Range of Consensus forecasts for January 2006 and October 2006 taken on 10 October 2005 Source: Consensus Forecasts, Bloomberg and Bank of England calculations Options-derived fan chart 10 October 2005 WTI spot price

13 Global current accounts Source: IMF Developing Asia Euro Area US Middle East and Africa Others and Statistical Discrepancy $ Billions

14 Long-term nominal interest rates Source: Global Financial Data UK US Germany Per cent

15 Long-term real interest rates UK 5-10 year real forward (derived from index linked gilts) US 5-10 year nominal forward less survey inflation expectations German 5-10 year nominal forward less survey inflation expectations Per cent Source: Consensus Forecasts, Bank of England calculations

16 Bond spreads Percentage points ,000 1,500 2,000 2,500 3,000 3, Asia Latin America Emerging Europe Basis points Emerging markets sovereign bond spreads Investment grade corporate bond spreads Source: JP Morgan Chase & CoSource: Merrill Lynch Sterling Dollar Euro

17 UK MONETARY POLICY: THE INTERNATIONAL CONTEXT Rachel Lomax Deputy Governor, Bank of England APCIMS Annual Conference 17 October 2005