The international environment

• Growth in the United States remained well above trend in the fourth quarter of 1998, and recent data suggest continued strength into 1999.
• Japan stayed in recession, with a sharp fall in GDP in the fourth quarter. The unemployment rate reached a record high in February. The March Tankan survey suggested that firms were less pessimistic about business conditions, but improvements in confidence may prove fragile.
• Euro-area GDP growth was on a downward trend throughout 1998. In Germany, GDP fell in Q4, but in France, the outturn was stronger. Growth in Italy continued to be low relative to France and Germany, as it has been since 1995.
• Inflation was broadly unchanged in the major industrialised countries in 1999 Q1. OPEC agreed oil-supply quotas on 23 March, and oil prices have risen to $16.80 dollars per barrel, an increase of more than 60% since 1 January.
• The Bank of Japan lowered the overnight call rate towards zero during February, and the European Central Bank cut its main refinancing rate by half a percentage point on 8 April. The Federal Reserve left US rates unchanged throughout the period.
• Output started to recover in a number of newly industrialised economies in Asia. The Brazilian authorities were able to reduce official interest rates without prompting large net capital outflows.
• Financial markets were calmer over the first quarter of 1999.

The international environment