Bank not out of ‘firepower’ to support economy through second wave, says Bailey

Bank of England governor Andrew Bailey has said policymakers are not “out of firepower” and will take prompt action to support the economy through a second or third wave of coronavirus.

Speaking at a virtual conference on banking stability, Mr Bailey cautioned the risks to the UK economy were “very much to the downside” due to spiralling numbers of Covid-19 cases and increasing measures to bring it under control.

But he gave assurances that the Bank had not exhausted its monetary policy tools, despite having slashed rates already down to the historic low of 0.1%.

He said: “We are by no means out of firepower and will use that firepower as appropriate, promptly and strongly, in response to any second and third waves (of Covid-19) where we think it’s necessary and appropriate to do that.”

He said the impact of a second wave of the pandemic would “depend on what measures have to be taken in response to that”.

“We are all of us very much looking at that as we see the start of what looks like a second wave,” he told the Single Resolution Board annual conference.

“The risks (to the economy) I’m afraid are very much on the downside and that reflects for all of us the pattern of returning evidence of Covid,” he added.

He said Britain was seeing a very “uneven” recovery, with some sectors bouncing back strongly and others remaining severely under-pressure.

But Mr Bailey said separately in an interview with The Yorkshire Post on Wednesday that he does not expect the economic impact of a second wave of coronavirus to be as bad as the first.

His reassurances over monetary policy action come after the Bank last month revealed it was looking at how negative interest rates could be put into practice.

But Mr Bailey has since sought to dampen expectations of an imminent move below zero.

Economists expect the Bank to fire up the money-printing presses once more and launch yet more quantitative easing (QE) on top of the existing £745 billion – possibly as soon as November.

It has added an extra £300 billion of QE since March to boost the money supply and economy in response to the crisis.

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