§ Sir B. Rhys Williams
asked the Chancellor of the Exchequer (1) what steps he will now take to bring about a reduction in interest rates in London, in view of the Government's intention that the present high rate is temporary;
(2) what calculations he has made of the extent of the depreciation of the exchange rate of the £ sterling against the other principal world currencies now necessary to achieve a reduction in interest rates in London to levels comparable with those in other major financial centres.363W
§ Mr. Denzil Davies
As my right hon. Friend made clear in the debate on the economic situation on 11th October 1976—[Vol. 917, c. 46]—the Government do not want interest rates to continue at the current high levels. Steps to bring them down will depend on progress in getting the growth of the money supply back on course; in particular, a continuing improvement in the tone of the market for Government debt will itself tend to reduce the level of interest rates.
As to the effect of further depreciation of the exchange rate on the level of interest rates, it must be remembered that external factors are only one of a number of influences on interest rates; interest rates are bound to be affected also by factors such as the state of inflationary expectations, the levels of public and private sector demand for finance, and the Government's objectives for the development of monetary aggregates.