§ Mr. Austin MitchellTo ask the Chancellor of the Exchequer (1) what distinction he draws in measuring inflation and assessing its importance between demand-pull, cost-push, leading-sector and asset inflation; how he assesses the damage done by each form; and if he will publish figures giving the relative impact of each form of inflation for each year between 1980 and 1990;
(2) pursuant to his answer of 4 July, Official Report, columns 13–14, if he regards as inflationary for the purposes of monetary and exchange rate policy the increase in the retail price of personal articles between August 1992 and May 1994 as shown in the retail prices index; what kind of articles were covered; and how much of the increase was due to increases in labour unit costs in production and distribution, respectively.
§ Mr. NelsonI regret that it has not been possible to provide a substantive answer before the summer recess. I shall write to the hon. Member shortly and place a copy of the letter in the Library.
§ Mr. Austin MitchellTo ask the Chancellor of the Exchequer what evidence he has from the monetary experience of individual countries of a link between increases in the money supply and the rate of inflation; what assessment he has made of the direction of any causal link; and if he will publish his evidence.
§ Mr. NelsonIt is the role of monetary policy to deliver the Government's inflation objective. Monetary policy influences inflation with a lag; the assessment of prospects for inflation in one or two years' time is based on a range of indicators and other data. Two of the main indicators are narrow and broad measures of the money supply. MO has proved a reliable indicator, primarily to signal current trends in the economy rather than to warn of future changes. M4 and its components and counterparts, such as lending by banks and building societies, contain important information on monetary conditions. However, experience indicates that the relationship between these aggregates and future inflation cannot always be relied upon.