Bank Rate (Hansard, 28 February 1961)

§ 2. Mr. C. Osborne
asked the Chancellor of the Exchequer why it is necessary to keep the London Bank Rate at 5 per cent. when the rate in Bonn is 4 per cent., Paris and Amsterdam 3½ per cent., and Washington 3 per cent.; what representations have been made to him by the allies of the United Kingdom to reduce the London rate; and whether he will discuss this question with the United States Government.

§ Mr. Selwyn Lloyd
In considering the level of Bank Rate many factors, both internal and external, have to be taken into account and no simple comparison can usefully be made with rates in other centres. I have received no representations from other Governments in the sense suggested by my hon. Friend. But, of course, the level of interest rates is a matter which is frequently discussed between Governments and central banks and I shall certainly be ready for continued consultations with the United States Government on the subject.

§ Mr. Osborne
But would it not be better if the Western world had a common financial policy and tried to get uniform low rates of interest everywhere and if this useless hot money were stopped being shuffled from one financial centre to another, causing disturbance everywhere? Would my right hon. and learned Friend discuss this with President Kennedy and his representatives?

§ Mr. Lloyd
There are a number of different problems in my hon. Friend's supplementary question. I do not agree that there is no benefit to the reserves from money coming into this country—the so-called hot money, not all of which is, in fact, hot. But I am in agreement with my hon. Friend that it is desirable to try to secure some long-term solution of the problem of the international imbalance of payments.

Mr. H. Wilson
Will the Treasury delegation which is now in Washington, or is shortly going there, discuss this matter with the United States Government? Would the Chancellor try to work out on a broad basis some international agreement to deal with "beggar my neighbour" policies?

§ Mr. Lloyd
The Treasury representatives have returned. Their discussions were confidential, but there was a general discussion which included this question of the level of interest rates. On the wider question, I have already answered by hon. Friend the Member for Louth (Mr. C. Osborne). One of the uses of the Bank Rate is also to assist in regulating the domestic economy.