Breaking: BOE’s Bailey: UK economy can be viewed as glass half full or half empty, GBP/USD slumps

“The UK economy can be viewed as a glass half full or half empty,” the Bank of England (BOE) Governor Andrew Bailey said while speaking at a webinar hosted by the British Chamber of Commerce on Tuesday.

On monetary policy, Bailey said: “We have looked very hard at the scope to cut rates further, including negative interest rates.”

Key quotes (via Reuters)

UK recovery has been quite rapid and quite substantial.

Q3 recovery a little bit ahead of what BOE expected in August.

Below the surface recovery is very uneven.

Labour demand is weak

Unemployment is higher than its reported number.

Housing market is strong, linked to stamp duty cut.

Hard yards are ahead of us.

Sees output down 7-10% compared with before pandemic.

We are seeing a very unfortunate faster return of COVID-19.

Return of COVID-19 reinforces downside risks in BOE forecast.

We will do everything we can to support the UK economy.

We do not intend to take any action to tighten policy until there is very clear evidence of significant progress to achieve 2% inflation target sustainably.

We are going to need a lot of evidence before we start to turn policy around.

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.

Market reaction

GBP/USD extended its sell-off and reached fresh two-month lows at 1.2717 as Governor Bailey leaves doors open for negative interest rates as a policy option.