Search ForexCrunch

The Bank of England Governor Andrew Bailey was out with some comments in the last hour, reiterating that the committee stands ready to take whatever action is necessary to achieve its remit if the inflation outlook weakens.

Key quotes:

  • Direct effects of COVID-19 are assumed to fade but have a persistent indirect effect on the economy.
  • We believe there is value in acting quickly and strongly to support the economy with asset purchases.
  • Trade in goods and services with the EU likely to be lower over time will weigh on GBP.
  • We assume UK economic recovery will be supported by substantial fiscal and monetary policy actions.
  • A small degree of excess demand expected in the second half of the three-year forecast period.
  • A coordinated policy with the UK government does not compromise BOE’s independence.
  • Calculation of headroom for monetary policy is self-imposed, we could review it, we haven’t had to.
  • We are not in the middle of a double-dip recession.
  • Our forecast does not have two consecutive quarters of negative economic growth
  • 2% contraction expected in Q4 GDP does not look dramatic but we are starting it 9% down from before COVID.
  • We have not said anything about negative rates today because we have set out the work we are doing on them.
  • It would be a cardinal sin to say we have a tool in the box and we didn’t know how to use it.
  • Will not put a timeline on work on negative rates, MPC is unanimous on the importance of doing that work.
  • The extra 150 bln pounds of asset purchases bring inflation back to target in two years.
  • The market puts a certain probability on negative rates, we don’t read anything into that.
  • We do not make predictions about which tools we are going to use, we are using forward guidance as well as QE.
  • Brexit talks continuing so right to base forecasts on the assumption of a deal.
  • Hopes there is goodwill around UK-EU trade from Jan 1.