We view economic and interest rate forecasting as rather more of an art than a science. The base information necessary for accurate forecasts is, of course, collected in a scientific manner, and we have access to forecasts from all key commentators. In particular, we analyse HM Treasury's Survey of Forecasts, so that we obtain a broad view of the current forecasts by economic commentators. We also maintain close contact with a number of City economists and financial journalists, who help us to round our view of economic developments and the trend in interest rates.

To this theoretical view, we add our knowledge and experience of the financial markets. Although academic forecasts assist in predicting the longer-term trend of both short- and long-term interest rates, it is market forces that determine specific interest rate levels relevant to our clients. It is the ability to understand these forces that achieves accuracy in day-to-day forecasting of both short- and longer-term interest rates. This applies not only to the short-term money market, but also to the gilt market, the derivatives market (which determines longer-term borrowing costs), and margins in the loan market.