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The Bank of England (BoE) policymaker, Michael Saunders crossed the wires in the last hour and said that positive news on vaccines has reduced some downside risks facing the economy but we are not out of the woods yet.

Key quotes:

  • There are some headwinds that could leave the economy stuck with persistently high unemployment and below-target inflation.
  • It those downside risks develop, risk management considerations argue for a relatively prompt monetary policy response in my view.
  • The effectiveness of any single policy tool in providing further stimulus – bank rate, asset purchases or guidance – may be less than usual or more uncertain.
  • Negative rates would be expected to pass through substantially to wholesale funding costs and partly to corporate deposit rates.
  • If more stimulus is needed then, in my view the most effective means may be to use a range of policy tools.
  • It also is possible that the economy will recover faster than expected.