• The budget was expansionary, bringing about a cumulative fiscal loosening of 1.5-2 per cent of GDP over the next four years.

• As a consequence, the pound and long-term interest rates will be higher, while immediate pressure to raise short-term rates is reduced.

• After a further quarter point increase in the repo rate to 6.25 per cent, we expect a pause in monetary tightening for the rest of the year.

• Sterling's strength will hit manufacturing which will grow by only 1.2 per cent in 2000, compared with overall GDP growth of 2.8 per cent.

• Despite continuing low claimant unemployment and earnings growth of 5.5 per cent in 2000, the labour market is not over-stretched.