Dr. Robert Kelly:

Sorry; that was my fault. There are a couple of things that strike me about that. First, it acts as a direct impediment to the pass-through of monetary policy. If it is the case that we have fixed-rate mortgages that do not variably adjust, although we could develop a fixed-rate market for other reasons, that becomes the provision of the private sector financing of mortgages. If they develop in that way we would have a more US-style market with long-term fixed-rate mortgages. That is a different type of mortgage market and that has impacts on how banks price other elements. These are real commercial decisions that a bank has to trade off. If a bank has a predominantly variable rate book, it will price differently than if it has a long-term fixed-rate book. This is the structure of the market. If we were to come along and say, for any given reason, that we insist mortgage rates can never be above X - let us pick a random number - is it the case then that if policy rates and the cost of funding for the banks were to rise above that, it would not reflect that? That would be a real impediment to monetary policy pass-through.

The second element is that it could over time leave us in a situation where it might cause anti-competitive pressures. When you think about the banking system, we are trying to introduce more and more competition, which generally drives down rates as we have seen before the recent increase, or certainly the premium above the policy rates. Introducing caps like this could have the unintended consequence of deterring some of that competition if banks believe they have to compete in a certain way.

On distribution, we had a couple of pieces of analysis. What I recall from them, and others might want to join me in a moment, is that during the actual pandemic what we saw in terms of the likes of the Gini coefficient distribution of wealth and income was actually the reverse. In that period, it became more uneven because of the supports. If we want to tease through the implications of that for monetary policy, there has been a lot of work in Europe on these distributional effects that Dr. Phelan might want to add on.