Oral question asked in the House of Lords, by Lord Barnett (Labour). It was answered on Wednesday, 16 February 2011.

Monetary Policy Committee

Question: I welcome the Answer from the noble Lord, but does it include what the Chancellor told the Treasury Select Committee; namely, that he is going to follow the policy of the previous Chancellor, which would not prevent him reducing or increasing quantitative easing, although he has the powers? Then again, the governor also said in his letter to the Chancellor, published on 14 February, that he believed that inflation would have been below the 2 per cent target if it had not been for three exceptional factors. Does the noble Lord agree with that because the Chancellor’s letter is somewhat unclear to say the least? As to the balance of risk that the governor was writing about, he seemed to be worried about the problems for growth and employment if he increased interest rates. Does the noble Lord agree with that?

Answer: My Lords, first, it is for the Bank of England to make any proposals on quantitative easing if and when it wants to, and the Chancellor will then look at them. I am certainly not going to deconstruct and provide a commentary on the exchange of letters yesterday. However, the noble Lord, Lord Barnett, indeed identifies some of the points made by the governor in the letter, where he clearly sets out the down-side risks and refers to questions about the ““margin of spare capacity””. On the other side, he refers to possible ““upside risks””, particularly in relation to inflation expectations. However, I suggest that noble Lords read the letters, rather than have me interpret them.

Secondary information

Type: Oral question
Reference: 725 c647
Session: 2010-12
Oral question type: 1st Supplementary
Chamber / Committee: House of Lords chamber
Related items: Banking
Monday, 7 March 2011
Written questions
House of Lords
Subjects: Interest rates Inflation Monetary policy Monetary Policy Committee Treasury
Link: View this Oral question on www.publications.parliament.uk