This publication is a summary of monthly reports compiled by the Bank of England's Agents, following discussions with around 700 businesses. It provides information on the state of business conditions, from firms across all sectors of the economy. The report does not represent the Bank's own views, nor does it represent the views of any particular firm or region

Activity in the UK economy has fallen sharply. After last autumn’s financial panic, output contracted at its fastest pace since quarterly data became available in 1955. But the position is worse in many other countries. Every member of the G7 has experienced large falls in trade and output, and the OECD believes that all but four of its thirty member countries were in recession in the first quarter of 2009.

Activity in the UK economy has fallen sharply. After last autumn’s financial panic, output contracted at its fastest pace since quarterly data became available in 1955. But the position is worse in many other countries. Every member of the G7 has experienced large falls in trade and output, and the OECD believes that all but four of its thirty member countries were in recession in the first quarter of 2009.

In January 2009, the Chancellor of the Exchequer authorised the Bank to set up an Asset Purchase Facility (APF) to buy high-quality assets financed by the issuance of Treasury Bills. The aim of the Facility was to improve liquidity in credit markets. The Chancellor also announced that the APF provided an additional tool that the Monetary Policy Committee (MPC) could use for monetary policy purposes. When the APF is used for monetary policy purposes, purchases of assets are financed by the Bank creating money, rather than by issuance of Treasury Bills.

In March 2009, the Monetary Policy Committee announced that, in addition to setting Bank Rate at 0.5%, it would start to inject money directly into the economy in order to meet the inflation target. The instrument of monetary policy shifted towards the quantity of money provided rather than its price (Bank Rate). But the objective of policy is unchanged – to meet the inflation target of 2 per cent on the CPI measure of consumer prices. Influencing the quantity of money directly is essentially a different means of reaching the same end.

This article reviews developments in sterling financial markets since the 2008Q4 Quarterly Bulletin up to the end of February 2009. The article also reviews the Bank’s official operations during this period.

The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 1.5 percentage points to 3%. The past two months have seen a substantial downward shift in the prospects for inflation in the United Kingdom. There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply.

1. This memorandum of understanding establishes a framework for co-operation between HM Treasury (the ‘Treasury’), the Bank of England (the ‘Bank’) and the Financial Services Authority (the FSA) in the field of financial stability. It sets out the role of each authority, and explains how they work together towards the common objective of financial stability in the UK. The division of responsibilities is based on four guiding principles: • clear accountability. Each authority must be accountable for its actions,

In recent weeks, the global financial system has undergone a period of exceptional instability. This instability was rooted in weaknesses within the financial system that developed during an extended global credit boom: rapid balance sheet expansion; the creation of assets whose liquidity and credit quality were uncertain in less benign conditions; and fragilities in funding structures. While these weaknesses had been identified, including by the Bank in previous Reports, few predicted that they would lead to such dislocation in the global financial system.