The Bank of England is “ready to do more” to fight the economic consequences of the coronavirus pandemic and the measures put in place to tackle it, including further interest rate cuts and an expansion of its corporate financing facility, according to its governor Andrew Bailey.
Writing in The Guardian, the former chief executive of the Financial Conduct Authority warned that "the risks are undoubtedly on the downside for a longer and harder recovery" and it may be necessary for further BoE measures as a result.
Bailey (pictured) noted that lockdown measures have led to a fifth of companies pausing trading, and a quarter have seen their turnover halve, while household spending is down by around a quarter.
UK output contracted by almost 6% in March and Bailey said that is likely to have fallen further, amid widespread use of the government's furlough scheme and an uptick in unemployment.
The BoE has taken unprecedented actions "in terms of their scale and speed" to the crisis, including increasing bond purchases and cutting interest rates to 0.1%, which Bailey argued have so far been effective.
However, he said, "no one can be sure exactly how the pandemic will unfold" and what the full economic consequences will be.
Bailey explained: "There are reasons to believe that economic activity will return at a faster pace than in many past recessions, but this depends on how the measures continue to be eased, what degree of natural caution is shown by people, and how much longer-term damage is done to the economy.
"The risks are undoubtedly on the downside for a longer and harder recovery.
"It is also possible that the pace at which activity recovers will be limited by continued caution among households and businesses even as official social distancing measures are relaxed."
As a result, Bailey said, the BoE "stand[s] ready to do more within the framework of policies we have used to date".
He added: "In view of the risks we face, it is, of course, right that we consider what further options, such as cutting interest rates into unprecedented territory, might be available in the future.
"But it is also important that we consider very carefully the issues that such choices would give rise to.
"The bank stands ready to do whatever we can to support UK households and businesses during this period of economic disruption and get through this together."
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