§ 29. Mr. Richard Wainwright
asked the Chancellor of the Exchequer what he estimates to have been the underlying rate of growth of money supply in the last six months.
§ Mr. Lawson
We estimate that underlying growth in sterling M3 since mid-February, the start of the current target period, may have been around 19 per cent. at an annual rate. This estimate is subject to wide margins of error, and month-by-month estimates of distortions to the recorded figures are particularly uncertain.
§ Mr. Lawson
The relationship between the different monetary aggregates is governed by a variety of factors and there can be significant divergencies in their behaviour over short periods. For example, over the past year the broad aggregates such as £M3 have grown much faster than narrower aggregates such as MI. Divergencies are often associated with changes in relative interest rates, but they also reflect influences such as trends in banking and financial practice. Nethertheless, policies directed at controlling any one of the aggregates by adjusting the PSBR and interest rates will tend to control the others over a period, even if not necessarily to the same numeriacal rate of growth. No series for M2 has been produced since 1971.
§ 37. Mr. Norman Atkinson
asked the Chancellor of the Exchequer if he remains satisfied that the British economy is overheated and that the need to continue the restrictions on money supply remains.
§ Sir Geoffrey Howe
Though it is falling quickly, the rate of inflation remains too high. If we are to bring it down further and so create the conditions in which output can progressively expand, continued control of the money supply is essential.