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Money Supply

Volume 975: debated on Monday 3 December 1979

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asked the Chancellor of the Exchequer if he will circulate in the Official Report a table showing for each quarter from the beginning of 1976 the actual increase in the money supply in terms of M3, the amount which would have been within the target range if the increase had always been at the

£ million
Sterling M3 actualStreling M3 at top of target rangeDCE actualDCE limit agreed with IMF
Changes over three months to:
1976–Mid-July1,0551,1602,3289,000
Mid-October1,3061,2002,216
1977–Mid-January-2301,240-309
Mid-April6411,280318
1977–Mid-July1,3111,2508537,700
Mid-October1,2511,280-135
1978–Mid-January1,8871,3301,036
Mid-April1,8521,3702,343
1978–Mid-July1,5891,3301,8265,000
Mid-October5711,370918
1979–Mid-January2,0121,3902,105
Mid-April7851,4301,552
1979–Mid-July1,7571,4402,321
Mid-October1,9631,4003,541
Source: Bank of England Quarterly Bulletin.
A range of £M3 growth was first set for the 12 months ending mid-April 1977. £M3 targets—and the DCE limits agreed with the IMF—have been set in terms of banking months rather than calendar quarters; accordingly the figures shown are for the relevant three-monthly periods.The targets—for the first two periods the ranges were set consistently with the agreed limit on DCE—have been:

  • (i) 9–13 per cent. for 12 months to mid-April 1977;
  • (ii) 9–13 per cent. for 12 months to mid-April 1978;
  • (iii) 8–12 per cent. for 12 months to mid-April 1979;
  • (iv) 8–12 per cent. for 12 months to mid-October 1979;
  • (v) 7–11 per cent. (annual rate) for 10 months to mid-April 1980–now rolled forward for the 16 months to mid-October 1980.
  • The second column in the table shows £M3 growth at an even quarterly rate based on the actual stock at the beginning of each target period. In the quarter to mid-July 1979 growth has been shown at the top of the 8–12 per cent. range for the two months to mid-June and at the top of the target range of 7–11 per cent. for the banking month of July.

    top end of the range in terms of the formula actually adopted and the amount which would have been within the target range if the limiting factor had been the maximum increase permitted by the International Monetary Fund in terms of domestic credit expansion.

    The information is as follows:Over the period DCE was different from £M3 growth and was below the ceilings set with the IMF. It is not possible to estimate what £M3 growth would have been had DCE been closer to the ceilings, but the final column shows the DCE limit as agreed with the IMF.

    asked the Chancellor of the Exchequer whether the adoption of a target rate for the money supply which is at least 10 percentage points less than the forecast rate of inflation is calculated to reduce real incomes by that amount; if so, on whom the burden is expected to fall; and, if he will circulate in the Official Report a description of the mechanism by which real incomes are to be maintained.

    I refer the hon. Member to the economic forecasts published on 22 November as a supplement to the December economic progress report.