Dr. Robert Kelly:

I will deal first with the comment on the uniform nature of the euro area or eurozone.

It has to be taken into account that there are specificities around individual countries. For example, even as regards the shocks we saw, levels of inflation are not uniform across Europe, although we operate against them. Countries closer to the war in Ukraine have experienced much higher inflation rates than we have. There is this variation and each economy is slightly different across Europe. We will never arrive at a point where we will necessarily see the same level of inflation across Europe. Different factors are driving inflation in different areas.

I will go back to the Deputy's core question around monetary policy essentially increasing the cost of mortgages, which it is. Everyone has experienced, in some shape or form, the impact of the inflation shock. The reality is the response has been and is to increase the cost of debt for households. That is one of the transmission elements of monetary policy. The other thing that complicates this a little more is that it is not uniform. We have seen a change in the structure of our mortgage market. We now have some fixed rate mortgages. Some of those will roll off over the next couple of years. Maybe close to 10% a year will roll off over the next three years. That is coming. We have seen tracker rates where there is an automatic pass-through and standard variable rates, SVRs, where there is not. We have a real unevenness across the book.

The Deputy talked about potential support for mortgage holders. We need to think about what the aim is. For example, mortgage interest relief is quite broad in that it will just tackle those who have experienced an increase in the interest on their mortgages, which I do not doubt causes pain for households and is an additional cost, but in no way captures the capacity of that household to absorb that increase. These broad measures, first, completely contravene what monetary policy is trying to do: they are acting against it and lowering inflation. Second, there are definite side-effects, some of which, if you read the international literature, are unintended, of doing broad-based policy such as this. A lot of it ends up in house prices. To my earlier point, the reality is higher-income households have bigger mortgages and hence pay higher levels of interest.

Instead of thinking about the issue in that way, we should come back to what we talked about around targeted and sustainably funded measures. If these come from the perspective of those households that may have experienced cost-of-living increases, part of which are mortgages, supports should be designed for them rather than policies where we are potentially designing a broad policy that is untargeted as regards people's need for that assistance. That is the overall constraint we are trying to manage within. There are many pressures to deliver on because it has been a big shock. The economy is trying to absorb it. What will be needed to ensure we do not raise total demand too much is a very careful balance of assisting those who need it most.