May 20, 2020 / 2:05 PM / 2 months ago

HIGHLIGHTS-Bank of England governor Bailey speaks in parliament

LONDON, May 20 (Reuters) - Bank of England Governor Andrew Bailey and other top officials spoke to lawmakers in Britain’s parliament on Wednesday.

Below are the highlights:


“We do not rule things out as a matter of principle. I mean that would be, I think, a foolish thing to do. But can I then follow that up by saying that doesn’t mean that we rule things in.

“The MPC has a history, really since the financial crisis... of keeping under periodic review the so-called lower bound.

“We’re very keen to observe and are observing how the economy responds to the cuts that we have made.

“(We’re) looking very carefully at the experiences of those other central banks that have used negative rates, and a number of them are actually publishing quite interesting assessments at the moment.

“The context in which negative rates are used is very important, the cyclical context. Secondly, the structure of financial systems in which they are done is important. Each country has a different structure... of its banking system. Thirdly I think the communication of it... would be absolutely critical.

“We’re not ruling it in, but we’re not ruling it out.

“I have changed my position a bit, and that is because... in that ancient history back in early March, before we got into this situation, it all seemed a long way away. But... in this situation, we have to review our tools as a matter of regularity, we have to keep them under consideration, but I say that in the spirit of ruling nothing out and ruling nothing in.

“It is not, in my view, a linear move from where we are today to negative rates.

“I don’t think we can assume that the pass-through would be linear... there are good reasons to think that the pass-through would be different, it could be weaker.

“It is interesting to look at what other central banks have written and considered about it... There are some pretty mixed reviews of (negative interest rates), I have to say.”


“I think the job retention scheme is a very sensible policy. One of the reasons that we’ve got a faster recovery (scenario) than, quotes, ‘a normal recession’, is because we do believe it will enable people to come back into work faster. It’s, to my mind, a very sensible policy in that respect.”


“As you can see from the scenario that we published, the challenge for us at the moment is getting inflation to return back up to target.

“I’m not worried about the pernicious sort (of deflation), which is debt deflation, I’m not worried about that at the moment. But it does require, obviously, us to target monetary policy, returning inflation to the target... the job for us is to get it back up to target at this point.

“A lot of that... will of course depend on the path of recovery of the economy, and what that does to slack in the economy.

“There is a very large amount of uncertainty around that path.”


“I’ve learned through this crisis that epidemiologists find that it’s as difficult to agree as economists, which I suppose is understandable but not entirely reassuring.

“If this (downturn) is an ‘L’-shape with no upward leg, no financial system is infinitely resilient.”


“If one is to use a letter of the alphabet - and I heard a lot about our scenario being ‘V’-shaped – it is a pretty lopsided V, and there is no doubt that in our scenario the recovery is far from immediate and takes place over a longer period of time.”


“The best way to gauge the market’s assessment of those risks (that increased national debt could fuel inflation) is to look at the market’s assessment of inflation risks, and we can do that by looking at the bond market... and there is not an increase in inflation risk in the opinion of the market, if anything the opposite.” (Reporting by Alistair Smout and David Milliken, editing by Estelle Shirbon)

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