The coronavirus represents an unprecedented economic “emergency” and the Bank of England will do anything it takes – even radical money printing operations – if it needs to, the new governor has said.
In an interview with Sky News, Andrew Bailey, who took over from Mark Carney at the beginning of this week, said “nothing is off the table” and hinted that there could still be radical monetary moves yet to come, insisting: “The Bank of England’s not done.”
The comments came the morning after the Bank and Treasury introduced a multibillion-pound package aimed at preventing a depression as companies and households respond to the implications of mass shutdowns and containment measures across the UK.
Despite the scale of the package announced by Chancellor Rishi Sunak – and analogous schemes from the US, France, Spain and other nations – markets were in freefall again with European indexes dropping to new post-crisis lows.
Mr Bailey said: “It’s obviously an emergency, it’s a very serious situation.
“I think we’re living in completely unparalleled times in terms of what’s happened in the last week – the closing of borders, the reduction of internal movement, the measures that preventing people from going about their daily lives, with good reason.
“All that of course has an effect on the economy and we’ve seen this, it’s manifest all around us.”
Mr Bailey added: “It’s going to be a very big downturn – we know that.”
Echoing the words of Mario Draghi in 2012 and the Chancellor Rishi Sunak last night, Mr Bailey said: “We will do what it takes to meet the needs of the economy and the needs of the people of this country.
“That’s our duty frankly. We will we will meet that duty, which is why we’ve acted now twice very, very decisively.
“And, of course, I wouldn’t want to tell you that it’s over because we will meet the needs of the economy and the needs of the people of this country.”
Asked whether this included radical measures such as cutting rates to zero, a vast new quantitative easing scheme – a form of money creation – or even printing money to give directly to households, Mr Bailey said: “Everything is on the table that is reasonable, within the policy tool set”.
He added: “We have a very large toolkit.
“I don’t rule anything out, frankly, but please don’t therefore interpret it that we’re about to do it either.
“I think nobody in their right mind in my role would say, well you know the following things I would never do – because that’s foolish.
“We have to be broad minded about this.
“You know the thing that was announced yesterday is in many ways as a quite a large step forward in terms of operations the Bank of England does because we haven’t set any limit.
“We will meet the needs of the economy.”
Asked whether he was worried that the falls in share prices on Wednesday suggested that the government and central bank’s response had failed to get ahead of the market reaction, boosting investors’ optimism, Mr Bailey said: “We watch the market very carefully.
“I always have one thing in mind.
“You have to ask the question: what would they have been had we not acted, and that’s an important question.
“They are sharply down. I think getting ahead is what we obviously aim to do. And it’s important.”
The Bank has now acted twice in the space of a week, but Mr Bailey hinted there may be more to come in the coming days.
“I’m clearly not going to rule it out because we have to meet the needs of the people of this country.”
“It would be foolhardy of me and I’m not going to say: the Bank of England’s done.
“Of course the Bank of England’s not done. We have to support the people of this country.”
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