And in the US, the housing market has not yet obviously stabilised, which is probably a precondition for broader recovery there. Domestically, the output data have been on the soft side, moving into line with the battery of surveys and the Bank’s regional Agents. The labour market also appears to have softened, with unemployment rising and fewer vacancies advertised. It is perhaps not surprising that, compared with recent slowdowns, there should be less hoarding of labour if firms expect the adverse environment to persist for a while; and with tighter credit conditions, stretching  the export-oriented euro area would be adversely affected, and the UK with it. But, seriously, should the UK cut the policy rate to head off the risk of a dent to output from a dollar collapse that hadn’t yet occurred? I don’t think so. 2  BIS Review 112/2008  working capital, making it harder for firms to finance the retention of a less-than-fully-occupied labour force. In the manufacturing sector, input and output price inflation have edged down very slightly. In the service sector, the data are less timely, though surveys have started to indicate some slowing in the pace of inflation. Commodity prices – not only energy, but food too – have continued to fall, perhaps reflecting the effects on global demand of the earlier price rises and the reduction of subsidies by a raft of emerging-market countries. Equities have fallen around 3%.
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.