§ Mr. Redwood
To ask the Chancellor of the Exchequer what interest rate increase would be needed to keep to the inflation target if earnings rise by 1 per cent. more than the Government's forecast. 524W
§ Mrs. Liddell
[holding answer 20 January 1998]: Interest rates are set by the Monetary Policy Committee (MPC)of the Bank of England to meet the Government's inflation target of 2½ per cent. The MPC bases its interest rate decisions on a range of evidence, and its response to higher than expected earnings growth would depend on how it affected the outlook for inflation.