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THOUGHTS ON THE GILT MARKET

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The most important data release for the UK gilt market this week is Thursday's announcement of February's retail pr...
The most important data release for the UK gilt market this week is Thursday's announcement of February's retail price inflation. In January the headline inflation rate did not grow over the month. However, economists are expecting a monthly rise of up to 0.7% in February taking annual inflation from January's 3.3% to 3.5%. An increase would be due mainly to a rise in mortgage rates.

Tomorrow brings the release of minutes from the February 2 monetary meeting between Bank of England governor Eddie George and chancellor Kenneth Clarke. As this meeting brought the last interest rate rise the gilt market will be interested to know what the deciding factors were. If GDP growth was significant in the decision, then the prospect of lower growth in the first quarter of 1995 could satisfy the market that the next monetary tightening is not imminent.

Yesterday brought February's M4 money supply growth and lending figures. Growth was stronger than expected at 4.6% (y/y), but still well inside the government's monitoring range of 3-9%. Lending to the private sector was down slightly, and lending for house purchase was still depressed. The gilt market is not expected to react negatively to this latest money growth data.
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