HC Deb 09 December 1982 vol 33 cc614-5W
30. Mr. Greenway

asked the Chancellor of the Exchequer what is the effect of each percentage point devaluation on inflation.

42. Mr. Eggar

asked the Chancellor of the Exchequer what is his estimate of the impact on the retail prices index resulting from a 1 per cent. fall in the trade weighted effective exchange rate.

55. Mr. John Townend

asked the Chancellor of the Exchequer what is his most recent estimate of the likely rate of inflation for the whole of 1983.

Mr. Hayhoe

In his autumn statement my right hon. and learned Friend the Chancellor of the Exchequer forecast that the inflation rate, as measured by the retail prices index, should fall to 5 per cent. early in 1983 and be around that rate at the end of the year.

The answer will depend on a large number of factors—for example, the relative movement of sterling against the different currencies used in the effective exchange rate indicator, whether the exchange rate movement is expected to be temporary or permanent, and the pressures on importers' margins at the time of the devaluation as well as on the stance of Government policy.

A broad indication of the order of magnitude involved is all that can be given. In most circumstances the effect on the retail prices index of a 4 to 5 per cent. change in the sterling effective exchange rate may amount to about 1 per cent. after around 12 to 18 months.