HC Deb 19 February 1979 vol 963 c34W
Mrs. Wise

asked the Chancellor of the Exchequer if he will list in the Official Report factors which he estimates as having an effect on the rate of inflation.

Mr. Joel Barnett

The rate of inflation is the outcome of a number of complex processes. Immediate causes include increases in exchange rates and interest rates and variations in profit margins. But these factors are themselves rooted in previous inflationary experience, and so a straight-forward assignment of inflation to particular cases is an over-simplification. Fiscal and monetary policy can also have an impact on inflation, mainly through the exchange rate and the pressure of demand. The various factors influencing the rate of inflation can move in opposing directions. Last year, for example, the rapid rise in unit labour costs was mitigated by generally favourable movements in commodity prices and food prices, and by a relatively high exchange rate. It cannot be expected that these factors will continue to operate so favourably; hence the importance of achieving moderate pay settlements.