Oral question asked in the House of Lords, by Lord Bilimoria (Crossbench). It was answered on Tuesday, 20 May 2008.

Bank of England: Inflation Target

Question: My Lords, I thank the Minister for that reply. We all appreciate the fact that the Monetary Policy Committee controlled inflation in what the governor referred to as the ““nice decade””. Does the Minister agree that now, with inflation rising at its fastest rate in six years and the economy cooling seriously, the Government are stuck between—if your Lordships will pardon the pun—a rock and a hard place? Does he agree that one of the advantages of being outside the euro is that we can set our own interest rates, but what is the point if we do not have the flexibility? How do the Government expect the Governor of the Bank of England to be able to stimulate economic growth if he has his hands tied behind his back?

Answer: My Lords, as I indicated in my Answer, in order to guarantee stability, inflation needs to be controlled. That is the basis on which investment leads to economic growth. The noble Lord is right to say that we are moving into a difficult period, whose duration we are not sure of. The Bank of England has a clear target, which is a signal of its objective and what it will seek to achieve with regard to inflation. That helps the wider economy in the decisions that are taken.

Secondary information

Type: Oral question
Reference: 701 c1354
Session: 2007-08
Oral question type: 1st Supplementary
Chamber / Committee: House of Lords chamber
Subjects: Bank of England Interest rates Economic growth Inflation Monetary policy Monetary Policy Committee
Link: View this Oral question on www.publications.parliament.uk