For the government, judging the relative importance of sterling, domestic demand, and how close the economy is to capacity, will be unusually tricky.

ECONOMIST: The economy

On the demand side, in the past couple of months sterling has risen again against the euro (see chart), and therefore may be squeezing exports once more.

ECONOMIST: The economy

Adhering to the public-spending plans set in last November's budget and raising taxes to lower borrowing, although an unlikely prospect, would dampen demand, so reducing expectations of higher interest rates, weakening sterling and boosting exports.

ECONOMIST: The economy