The early part of 1995 saw considerable turbulence in the foreign exchange markets, resulting in significant currency realignments. Relative exchange-rate patterns have not changed very much in the last three months, and the effects of the real exchange-rate realignment are beginning to be felt, with growth slowing in those countries whose currencies appreciated, and inflationary pressures building up in some of the countries that depreciated. In addition to the destabilising effects of the realignment, signs are beginning to emerge that growth is slowing of its own accord throughout the OECD, particularly in North America. The recovery also appears to have become somewhat more hesitant than we had anticipated in Germany and the UK, although other European countries are continuing to expand at above trend rates. The fragility of the Japanese financial system has been clear for some time, but the potential scale of bad debts is only now becoming known, and this appears to be having a deleterious effect on both financial and consumer confidence.