Interpreting movements in market rates is, however, complicated by the fact that other factors influencing yields have not been constant. First, the recent run of UK data has been unusually strong relative to market expectations. That should generate upward pressure on market interest rates as, other things equal, a reduction in the degree of monetary stimulus would indeed become appropriate sooner if growth turns out stronger than expected. Bank staff have constructed a time series for the news in the incoming data by calculating, for 14 different data series, the deviation of the outcome from the market’s expectations (as recorded by the median expectation of economists polled by Bloomberg), normalised by its standard deviation. An aggregate timeseries measure can then be obtained by taking an (unweighted) average across the most recent observations for each series. Chart 6 shows such a measure back to 2006, together with analogous series for the United States and the euro area. The series for the United Kingdom recently reached its highest level over this period, emphasising just how much upside news there has been here recently. Moreover, although both the United States and euro area have also generally seen upside news of late, it has been nowhere near as strong as in this country. Market interest rates should therefore have been expected to rise, and by more here than in the other two jurisdictions.
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