Economy: Interest Rates

Lord Peston Excerpts

Wednesday 18th June 2014 Lords Chamber

[Lord Newby]

My Lords, that is an important point. As I said in answer to the earlier question, any increase in interest rates is likely to be gradual and to reach a new equilibrium that is lower than it was in the past. It is worth saying that mortgage payments are at a historically low level in terms of proportion of income, and that rates would have to rise by 4% to get to the 2007 proportion of income. Nobody, I think, whether it is the Bank of England or independent experts, has suggested that interest rates are likely to rise by that much in the foreseeable future.

[Lord Peston (Lab)]

My Lords, to place this important Question in context, is it the Government’s view that there are two possible aims of economic policy: the first is that we should maintain as high a rate of real, sustainable growth as is feasible, and the second is that we should maintain a stable, low inflation rate? Bearing in mind that those two objectives are not always compatible, what is the Government’s view of what the policymakers ought to be doing at the moment?