Skip to main content
Access every election story that matters
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Access every election story that matters
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
// //

Then-chief executive of the Financial Conduct Authority Andrew Bailey speaks at the Bank of England in London on Feb. 25, 2019.

POOL/Reuters

Bank of England Governor Andrew Bailey painted a cautiously optimistic picture for Britain’s economy after the COVID pandemic and did not expect a big jump in inflation, which his chief economist and some investors see as a risk.

“If I had to summarize the diagnosis, it’s positive but with large doses of cautionary realism,” Bailey said in a speech to the Resolution Foundation, a think tank.

A slowing of COVID infections and the “huge achievement” of Britain’s vaccine program meant there was light at the end of the tunnel, he said.

Story continues below advertisement

After suffering Europe’s highest COVID death toll, and the country’s biggest economic shock in 300 years, Britain has rolled out a fast COVID-19 vaccination program which has reached more than 40% of adults for a first shot.

Finance minister Rishi Sunak’s decision last week to extend his jobs support program until the end of September was likely to limit the peak in unemployment but was unlikely to completely stop joblessness rising after it ends, Bailey said.

Sunak’s budget also included measures to support economic growth through significant investment in infrastructure, skills and innovation, he said, potentially easing one of the drags on Britain’s economy.

But there was a lot of uncertainty about how much the changes in the economy caused by the pandemic would persist.

“We will work more from home than we used to and shop more online because new habits will persist to some degree, and to the extent they unwind it will be over a period of time,” Bailey said.

Last month, the BoE said Britain’s economy would probably contract by 4% in the first three months of 2021 before recovering rapidly over the rest of the year to regain its pre-pandemic size by the first quarter of 2022.

Bailey said the expected recovery would be helped by the BoE’s ultra-low interest rates and its bond-buying program, “and in my view it amply justifies our current stance on monetary policy.”

Story continues below advertisement

He said the central bank’s task was to get inflation back up to its 2% target and hold it there, striking a different note to BoE Chief Economist Andy Haldane who last month said an inflationary “tiger” had awoken.

Yields on bonds issued by governments in Britain and other countries have climbed sharply in recent weeks as investors price in higher growth and inflation on the back of trillions of dollars of stimulus pumped into the global economy.

“For the moment, I would say - viewed from where we are today - our task is to get inflation up to target, frankly,” Bailey said. “Our task... is to get it towards target and hold it there.”

He said contingency work by the BoE for the possible future use of negative interest rates, combined with work on new guidance about how it might do the opposite and tighten policy, were a recognition of the “two-sided nature of the risks we face.”

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies