Monetary Policy Report submitted to the Congress on February 27, 2008, pursuant to section 2B of the Federal Reserve Act

Figure of equity indexes in selected advanced foreign economies, 2006-08. Data are plotted as four curves and are expressed as indexes (the week ending January 6, 2006 = 100). From January 6, 2006, to around mid-September of that year, the curves for Canada, the United Kingdom, and the euro area track each other closely. Over nearly the entire period, the curve for the euro area stays above the curves for Canada and the United Kingdom. After mid-February 2007, the curve for Canada remains above that for the United Kingdom; until then, the curve for the United Kingdom stays above that for Canada most of the time. On January 6, 2006, the three curves begin at 100, peak around 107 in early May, drop to around 97 in mid-June, and rise again to around 105 in mid-September; at this point, the curves begin to diverge. The curve for the euro area rises to around 125 by late February 2007, while the curves for Canada and the United Kingdom both rise to around 115 over the same period. All three curves then drop: The curve for the euro area falls to about 115, while those for Canada and the United Kingdom both end up around 111--all over the course of about three weeks. From this point in mid-March, the curves for the euro area, Canada, and the United Kingdom rise, reaching around 130, 125, and 120, respectively, by late June. Between late June and early November, all three curves fall roughly 10 index points and then regain 10 index points to end up about where they were before. Between early and late November, each curve drops about 10 index points; this time, each curve regains only about 5 index points over the next month or so. At this point, the curves for the euro area, Canada, and the United Kingdom are each at about 125, 120, and 115 respectively. In early January 2008, all three curves drop sharply. By early February, the curve for the euro area falls to around 110, where it hovers over the remainder of the period. The curve for Canada also drops to about 110 by early February, but it increases later in February, reaching a value of around 118 by the end of the period. The curve for the United Kingdom drops to around 102 by early February and hovers there over the remainder of the period. The curve for Japan stays below the other three curves during the period. Starting at 100 on January 6, 2006, the curve stays between around 95 and 105 until late May; between then and mid-June, the curve drops to around 90 and fluctuates between about 90 and 98 for the rest of 2006. Over January and February 2007, the curve rises to a peak of around 107, staying between around 101 and 107 until late July. Between late July and mid-September, the curve drops about 15 index points to around 90, rises to nearly 100 in early October, then falls fairly steadily by early February 2008 to around 75, around which the curve remains for the rest of the period.

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