In the first half of the year, available economic information was broadly in line with the Bank’s expectations. By midsummer, however, evidence began to accumulate that the recovery in U.S. investment—a key factor in the expected pickup in growth in the second half of 2001—would be delayed and that the slowdown in that country would be deeper and last longer than anticipated.
Our economy is large, diversified, and flexible; our financial markets are deep and liquid; and, as I have mentioned, in the midst of financial turmoil, global investors have viewed Treasury securities as a safe haven.