Monetary Policy Committee

Lord Eatwell Excerpts

Wednesday 6th July 2011 Lords Chamber

[Lord Sassoon]

I apologise to my noble friend for cutting him off earlier, but I am glad that he has got in now. It is certainly a bit of a puzzle that there is continued weakness in broad money growth at a time when nominal GDP is growing. I am no macroeconomist, but when I look at the tables I see that, among other things, the velocity of the circulation of broad money is increasing. I cannot see behind me to see whether my noble friend is nodding, but I think he is, so I am all right on that one. Any question of additional quantitative easing or withdrawal of quantitative easing will be decisions for the MPC whenever it sees fit.

[Lord Eatwell]

My Lords, would the Minister agree that increases in commodity prices and oil prices affect the economy of France, Germany and the United States just as much as they do of Britain? Why then is Britain’s inflation rate more than twice that of France, twice that of Germany and significantly greater than that of the United States?

[Lord Sassoon]

My Lords, the really important thing here is that the inflation expectations remain very low. All the range of forecasters is predicting that inflation will come down to the range of 2 per cent to 2.1 per cent in 2012 and beyond. That is the critical challenge for the MPC, in which it has the market’s confidence, and that is what underpins the very low interest rates that we continue to enjoy. We suffer, inherited from the last Government, a deficit the size of Portugal’s, but we have interest rates at the level of Germany’s.