HL Deb 02 February 2005 vol 669 c49WA
Baroness Noakes

asked Her Majesty's Government:

Further to the Answer by Lord McIntosh of Haringey on 16 December 2004 (Official Report, col. 1507), whether they will explain how the exchange rates underlying the Pre-Budget Report forecasts are made; and what exchange rate against the pound sterling is contained in the Pre-Budget Report forecasts for each of the years 2004–05 to 2009–10 for the euro, the United States dollar and the Japanese yen. [HL1020]

Lord McIntosh of Haringey

As stated in the 2004 Pre-Budget Report (Cm 6408, footnote 2, page 159), the sterling exchange rate in Treasury economic forecasts is assumed to accord with an uncovered interest parity (UIP) condition, whereby the exchange rate index (ERI) moves in line with the differential between UK and foreign interest rates. Treasury forecasts do not make separate assumptions for the value of sterling against individual currencies: the UIP assumption is applied only to the ERI.