HC Deb 30 November 1989 vol 162 cc831-2
11. Mr. John Townend

To ask the Chancellor of the Exchequer what account he takes of each of the monetary indicators in setting monetary policy.

Mr. Lilley

My right hon. Friend sets a target for MO and also monitors broad money and other financial indicators, in particular the exchange rate.

Mr. Townend

Does my hon. Friend agree that over the past 18 months the increase in the rate of inflation was due principally to the increase in broad money? Can he assure the House that in future the Chancellor will take more notice of broad money than his predecessor did?

Mr. Lilley

It would probably be more accurate to retrace the resurgence of inflation to the relaxation of monetary policy at the time of the collapse of world stock markets in October 1987. It is significant that we rarely relax monetary policy in response to non-inflationary matters to keep growth going. That is always the intention of the Opposition. They would have continuously rising inflation but we are determined to get inflation down.

Mr. Rowlands

If the Minister monitors exchange rates, will he tell us the exchange rate between the pound and the deutschmark on the day of the speech by the right hon. Member for Blaby (Mr. Lawson) at the Conservative party conference when he said that his was not a party for devaluation, and what the figure is now?

Mr. Lilley

The current exchange rate is much where it was at the beginning of 1987, let alone then. The policy consistently advocated by the Opposition would destroy the value of the pound internally and externally.

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