UK economy starting to recover but jobs news bad, BoE’s Bailey says

FILE PHOTO: Bank of England Governor Andrew Bailey at the central bank in London, Britain March 16, 2020. Tolga Akmen/Pool via REUTERS/File Photo

LONDON (Reuters) – Britain’s economy is recovering a bit more quickly than the Bank of England thought a month ago as the government eases its COVID-19 lockdown, but news from the labour market is mostly negative, Bank of England Governor Andrew Bailey said

“As partial lifting of the measures takes place, we see signs of some activity returning,” Bailey said after the BoE announced a 100 billion pound ($124 billion) increase in the size of its bond-buying programme but slowed the pace of purchases sharply.

“We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.”

Bailey told reporters that the BoE’s plan to stretch its now 745 billion-pound bond-buying programme until around the turn of the year was still faster than anything done by the British central bank prior to the coronavirus crisis.

“We’re slowing from … warp speed to something that by any historical standards still looks fast,” he said.

Deputy Governor Ben Broadbent said the BoE now estimated that Britain’s economy was heading for a roughly 20% contraction over the first and second quarters of 2020, compared with a fall of about 27% included in a scenario it published last month.

Broadbent said negative news from Britain’s labour market was probably more significant for the inflation outlook – which is central to the BoE’s mandate – than then pick-up in activity.

On negative interest rates, Bailey repeated previous comments that they were an option for the BoE, but that the issue was complex and taking borrowing costs below zero was not in any way imminent.

Reporting by William Schomberg, editing by David Milliken

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