BOE’s Bailey: Economic outlook is positive but with large doses of cautionary realism

"The outlook is positive but with large doses of cautionary realism,” the Bank of England (BOE) Governor Andrew Bailey said at a webinar hosted by the Resolution Foundation. His speech is titled ‘The economic outlook.”

Additional quotes

“Covid has been both a demand and supply shock to the economy, and the recovery, therefore, has to be in both elements.

“Absent a dual recovery, dealing with the issues that arise will be more difficult.”

“Longer-term scarring damage to the economy will be more limited than in some past recessions, but there will most likely be structural change.”

“Important to boost supply capacity to raise the sustainable rate of growth.”

“Important to emphasize the role of the forward guidance that the MPC has adopted, and the announcements made a month ago on so-called toolbox issues.”

“We recognize the increasingly two-sided nature of the risks we face.”

“Toolkit decisions should not be interpreted as a signal about the future path of monetary policy.”

“Contingency planning for negative rates implies nothing about our intentions in that direction.”

“Nor does it imply that negative rates are our chosen marginal policy tool, something that in my view is state-contingent at all times.”

“Far from clear whether or to what degree changes to the economy during covid will persist post-covid and therefore what will be the longer-term impact on the economy.”

“My best guess is we will see some persistence of structural changes of the economy under covid, not full persistence but not a full reversion to pre-covid either.”

GBP/USD reaction

Governor Bailey's comments failed to have any material impact on the pound, as GBP/USD kept its range around 1.3835, modestly flat on the day.

About BOE Governor Bailey

Andrew Bailey is the Bank of England's Governor. He took office on March 16th, 2020, at the end of Mark Carney's term. Bailey was serving as the Chief Executive of the Financial Conduct Authority before being designated. This British central banker was also the Deputy Governor of the Bank of England from April 2013 to July 2016 and the Chief Cashier of the Bank of England from January 2004 until April 2011.