HC Deb 05 February 1997 vol 289 c613W
Mr. Michael Brown

To ask the Chancellor of the Exchequer what factors underlie his decision to set a target monitoring range of 3 to 9 per cent. for the monetary M4 growth rate. [14046]

Mrs. Angela Knight

Broad money is one of the indicators that is considered when taking monetary policy decisions.

The Government decided in the November 1996 Financial Statement and Budget Report to retain a medium-term monitoring range for M4 of 3 to 9 per cent. This was based on an assessment of likely movements in M4 velocity—the ratio of money gross domestic product to M4.

This medium-term monitoring range is not an operational target, but provides an indication of the growth of M4 that is likely to be consistent with permanently low inflation. Because of the potential effects on velocity from changes in the rate of financial innovation, the high level of merger and acquisition activity, and the introduction of a gilt repo market, the Government will continue to keep the monitoring ranges for the monetary aggregates under review.