Please find attached the Global Markets Monitor for the week ending 29 June 2001.

Executive Summary 

US: Fed trimmed short-term interest rates by a quarter-point this week, signaling it is nearing the end of its easing cycle, while retaining its easing bias.  If inflation subsides and economic data releases remain weak there is room for a further 25 bp cut at the next FOMC meeting on August 21.
UK: The BOE's MPC will meet on 4-5 July when we expect it to hold interest rates steady due to higher retail inflation, accelerating housing prices and persistently strong consumer spending. 
Europe: Economic weakness in Europe has deepened and there is some evidence inflation has begun to recede.  France is showing further signs of slower growth and the German business climate has deteriorated.  The ECB meets on 5 July, we expect do not expect it to cut interest rates until inflation is more under control in the euro-zone.  Greater risks to growth, however, will probably prompt the ECB to trim by 25 bp at the next meeting on July 19.
Japan:   
Country Update - Brazil: Brazil's COPOM is acting aggressively to defend the slumping real by sharply cutting overnight interest rates and intervening in the FX market.  COPOM has undertaken a number of measures to bolster its international reserves to ensure adequate resources to stem any further currency depreciation, including drawing $2bn from Brazil's existing stand-by arrangement with the IMF.  The central bank has maintained its policy on intervention in the currency markets, limiting its use to periods of increased exchange rate weakness.  The real could come under additional pressure as the country's energy crisis slows manufacturing output causing export earnings to deteriorate.  


 

Thank you,
Maureen Raymond-Castaneda
and Gwyn Koepke