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Money Supply

Volume 979: debated on Thursday 21 February 1980

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asked the Chancellor of the Exchequer when he expects to publish the proposed consultation paper on methods of controlling the money supply.

We hope to publish a consultative document on monetary control shortly.


asked the Chancellor of the Exchequer whether his most recent announcement of the rate of increase of the money supply takes full account of inflows from overseas during 1980.

The Government's monetary target reflects the objective of reducing the rate of inflation. The way in which the target is achieved will depend, inter alia, on the effect of external influences.


asked the Chancellor of the Exchequer if he is satisfied with the effectiveness of his control the money supply.

The fundamental elements of monetary control are fiscal policy and the level of interest rates. The forthcoming Treasury-Bank consultative document on monetary control will discuss possible improvements to existing techniques. However, it is important to remember that it is the underlying trend that it is important for monetary control; money supply figures inevitably fluctuate from month to month.

asked the Chancellor of the Exchequer whether he will explain, further to his reply dated 3 December 1979, concerning the increase in the money supply, how it is possible to have a target for sterling M3 which is consistent with direct credit expansion; and if he will illustrate this by reference to an increase and a decrease in the surplus on the balance of payments.

A target for £M3 may be consistent with an objective for DCE if a view is taken on the likely difference between them over the target period. In the event consistency between them will depend, inter alia, on external factors and on the way in which the objective is framed. The relationship between balance of payments flows and the monetary aggregates was discussed in Treasury working paper No. 5 and in an article in the December 1978 edition of the Bank of England Quarterly Bulletin. Those articles include a number of examples that the hon. Gentleman might find helpful.