LONDON (MaceNews) – The Bank of England’s chief economist has downplayed concerns that years of low interest rates have allowed the buildup of unsustainable debt levels across the developed world.
“I don’t see balance sheets being overstretched … I see a great deal of caution” among companies and households, said Andy Haldane, addressing a conference organized by the Centre for Policy Studies. “Nor do I see big and growing asset price bubbles. Balance sheet footings are in a fundamentally different place than we were” ahead of the onset of the financial crisis in 2008.
Haldane also declined to call for fiscal restraint ahead of what is expected to be an expansionary UK budget due next month. “It’s true enough that the cost of borrowing for the government has never been lower than now,” although he cautioned that the government must evaluate how a “real cost of borrowing of roughly zero compares with the social return of spending that money.”
The outgoing governor of the Bank of England, Mark Carney, has joined other central bank heads in calling for national governments to prepare to fight any future downturn with fiscal spending. However, Haldane did not reveal his thoughts on the short-term trajectory of UK interest rates in the wake of brighter economic data after the economy flat-lined in the fourth quarter of 2019. Underlying retail sales jumped by 1.6% in January, the first increase after five consecutive months of falling or flat growth.