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Published:  23 July, 2008

By Jim Budd

A rise in UK interest rates to between 4.5 and 5% over the next two years and the /euro rate to rise to around E1.48-1.50 over the next few months were the headline predictions of the Wine & Spirit Association's (WSA)/Fortis Bank finance seminar. Simon Law, head of treasury at Fortis Bank, outlined some of the ways the drinks industry can mitigate both the swings of the currency market and changes in the exchange rate. Taking no action' is not an option, he argued. He claimed that the foreign exchange market is more transparent than it was, and said that for much of the euro's life the sterling/euro rate had been quite stable. However, the euro is likely to weaken unless the Central Bank changes its policies,' he added. Law predicted that the pound's recent strengthening would continue, with a new platform formed between E1.48 and E1.50. Against the dollar, sterling would dip a little from its recent peak of just below $1.70. Douglas Godden, head of economic analysis at the Confederation of British Industry (CBI), predicted that although overall UK growth will increase, consumer spending will be dampened by a gradual rise in interest rates and future tax increases.