— Sees “Modest” Recovery in Recent Consumer Spending
LONDON (MaceNews) – The Bank of England’s chief economist sounded a decidedly cautious note on the possibility of negative interest rates in the UK, just a week after BoE Governor Andrew Bailey confirmed that sub-zero rates are actively under review.
“Reviewing and doing are different things,” said Andy Haldane on Tuesday in a webinar organized by the Confederation of British Industry, although he stressed that the bank’s policy is “not to rule anything out.” Haldane expressed concern that negative interest rates could lead to a “squeeze on the financial sector.”
His comments come after Bailey told members of parliament that he’d changed his position on sub-zero rates since mid March. The Bank of England has announced two emergency rate cuts since the onset of the financial crisis, leaving its benchmark at a record-low 0.1%. The Bank’s Monetary Policy Committee next meets on June 18th.
The UK economy remains largely shuttered, with non-essential stores prohibited from trading until mid-June, according to guidance issued late Monday by Prime Minister Boris Johnson. However, recent data suggest a “stabilization and very modest recovery in spending over the past few weeks,” said Haldane, adding that business sentiment has improved “modestly” as well.
“The data have been just a shade better than expected when it comes to household spending,” he added. But he echoed other Bank of England officials in predicted that the economic recovery will not “be as sharp as the fall,” forecasting a “fairly-lopsided V-shaped” recovery, reiterating Bailey’s cautious of downside risk to the bank’s forecasts.