Monetary Policy Committee

Lord Myners Excerpts

Wednesday 6th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, it is part of the discipline of the way in which the Monetary Policy Committee operates that it is required to write letters to the Chancellor when inflation is outside the target range. The most recent exchange of letters was in May 2011, in which the Chancellor recognised the factors driving short-term inflation, including, particularly, the very high commodity prices. However, it is important to recognise that the MPC’s mandate enables it to look through short-term movements in prices towards a medium-term target.

[Lord Myners]

My Lords, as the Minister said, the Bank of England has two monetary policy objectives: to deliver the inflation target, currently set at 2 per cent, and to deliver growth—and to be accountable to the Treasury and Parliament for doing so. On which of those two objectives does the Minister think the governor and the Bank of England are doing best?

[Lord Sassoon]

I would always hesitate to hold up and criticise the characterisation of the Bank of England MPC’s target by the noble Lord, Lord Myners. However, as I have made clear, it has one primary target—to maintain price stability, with the target that I have already confirmed—and it is doing a fine job in extremely difficult circumstances, when oil prices are 40 per cent higher than they were at the end of last year and agricultural prices are 60 per cent higher than a year ago. Against that background the MPC is doing a fine job in very difficult conditions.