Pound to dollar exchange rate forecast (1 GBP to USD) : in Q4 2011: 1.61. In Q1 2012: 1.61, in Q1 2013: 1.61. Pound to euro exchange rate forecast (1 GBP to EUR): in Q4 2011: 1.12. In Q1 2012: 1.14, in Q1 2013: 1.19. "The Monetary Policy Committee (MPC) voted to leave the Bank Rate unchanged at 0.5% at its July meeting. This was not a surprise given a recent weakening in economic data (e.g. the manufacturing purchasing managers’ index fell to a 21 month low in June). "While UK CPI inflation held steady at 4.5% in May, core inflation (excludes food and energy prices) fell from 3.7% in April to 3.3%. But increasing concern surrounds the health of the UK economy. "The MPC has stated that the current weakness of demand growth is likely to persist for longer than previously thought. With household spending being much weaker than expected and slowing economic activity, we think that the MPC will feel uncomfortable raising interest rates anytime soon. "Indeed, talk by some members about the possible need for further asset purchases (i.e. more quantitative easing) suggests that greater weight is attached to the downside risks. We now expect a slower pace of normalisation. Our new forecast is for the MPC to raise interest rates in the first quarter of 2012 (by 25 bps), to be followed by further rises in 2012 to round out the year at 1.5%."

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