For medium-term maturities, so-called “breakeven inflation rates” – derived from the difference between the yields on conventional and inflation-indexed gilts – have stabilised over the past few months. Given the frictions that many believe distort indexed-linked yields, 15 I also like to look directly at nominal forward rates. The underlying thought is that, relative to fluctuations in bond yields brought about by past shifts in inflation regimes, longer-term risk-free real rates may not move around a great deal, so that any systematic inflationary impulse would be quite likely to show up in nominal yields. Consistent with that, following the UK’s disinflation in the early-1990s, medium-term nominal forward rates fell by around 400bp. Since the new monetary regime became established in the late 1990s, they have been more or less stable, and currently remain within the range prevailing over the past decade or so. Surveys of household inflation expectations tell a broadly consistent story. For near-term horizons, they have picked up sharply. What limited information we have on the public’s  14  Broad money (M4) can be adjusted using Bank estimates of banks' intragroup business with other financial corporations, as well as banks' repo activity with LCH.Clearnet's RepoClear service. Such estimates are based on anecdotal information provided by a small sample of banks. Work is under way within the Bank to improve the basis of these estimates, see Burgess, S and Janssen, N (2007), “Proposals to modify the measurement of broad money in the United Kingdom: a user consultation”, Bank of England Quarterly Bulletin, vol.
12  BIS Review 112/2008  Chart 1: Premium on unsecured interbank lending (Libor-OIS)  Chart 2: Selective effective rates and Bank rate  Basis points 140 1 month  3 month  6 month  Per cent 9.0  PNFC overdraft rate  120  8.0  100  7.0  80  6.0 5.0  60 Bank rate  40 20  3.0  Household mortgage rate  2.0  0  1.0  -20 2002  2003  2004  2005  2006  2007  2008  0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008  Chart 3: Credit condition survey(a)- large corporates  Chart 4: CPI and the capital goods deflator  Net percentage balances(b)  Cheaper credit  Percentage changes on a year earlier 10  80 Spreads  Loan covenants  4.0  8  60  6  40 20  CPI  0  4 2  -20  0  -40  -2  -60 Dearer credit  -80  Capital goods  -100 Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3 2008 2007 2008 2007  -4 -6  1989 1991 1993 1995 1997 1999 2001 2003 2005 2007  (a) The blue bars show responses over the past three months. The red diamonds show expectations over the next three months. Expectations balances have been moved forward one quarter so that they can be compared with the actual outturns in the following quarter.