The governor of the Bank of England Mervyn King says there has been turbulence in world financial markets and mixed signals about the economy in the UK.
This statement follows last weeks decision by the Monetary Policy Committee to maintain the base rate a 5.25% and increase inflation by 1% to 2.8%.
King says: The sharp falls in asset prices and the widening of risk premia that were evident during late February have at least partially unwound.
The FTSE All-Share index, which fell by around 5% has all but regained its level prior to the onset of the turbulence.
The main exception is the sub-prime mortgage market in the United States where the increase in spreads, which reflected higher default relate, has persisted.