House price inflation
While the Council of Mortgage Lenders was ill served by press exaggeration, its contention that interest rates would have to double to get house-price inflation under control was probably right.
This occasion should serve to show that there are serious doubts about the suitability of interest rates for regulating the property market while their principal function,post-Keynes,is to manage demand in the larger economy.
Interest rates cannot simultaneously be high to restrain the property market and low to stimulate production and consumption. It would be better to tax property price rises directly through a levy on the land values that underlie the problem and leave interest rates to find their own level, consistent with full employment and low inflation.
David Reed
Labour Land Campaign