§ Mr. Gouldasked the Chancellor of the Exchequer what effect on the sale of gilts is produced by (a) the current rate for sterling, (b) the prospect of changes up or down in the rate and, (c) the prospect of changes in interest rates.
§ Mr. Denzil DaviesReactions in the gilt-edged market are determined by a wide range of influences. In so far as it is possible to make broad estimates of the impact of any one variable, this is only meaningful for changes in the specified variable rather than for its current level or rate. If the prospect of a sterling appreciation reflects improving trends in the domestic economy these same influences will probably also be helpful for sales of gilts by the authorities; conversely the prospect of a depreciation because of adverse domestic trends will tend to be unhelpful for gilts. The prospect of increases in interest rates, with an associated fall in gilt-edged prices, will tend to discourage the public from purchasing gilts; whereas the prospect of falling interest rates and rising prices will generally encourage such purchases.