The governor of the Bank of England has said that the central bank is “not out of firepower” to support the economy, following the dramatic shock caused by the coronavirus pandemic.
Andrew Bailey told traders that the bank has more ammunition left and that major bond-buying drives are more effective following major crises, in a speech to the Jackson Hole economic policy symposium.
Mr Bailey stressed that the central bank appreciated the need to keep enough “headroom” to deal with future shocks.
He said: “We are not out of firepower by any means, and to be honest it looks from today’s vantage point that we were too cautious about our remaining firepower pre-Covid.
.@bankofengland Governor Andrew Bailey is now delivering the opening remarks at the #JacksonHole2020 Economic Symposium. Read his remarks at https://t.co/k3NYs4kspX and watch the live stream at https://t.co/ZJAttX6iHc. #EconTwitter pic.twitter.com/vLLoqZ8rbg
— Kansas City Fed (@KansasCityFed) August 28, 2020
“In the decade ahead, I think we need to take on board the message the Covid crisis has reiterated, namely that our tools may be state contingent in their effects.
“And with that in mind, let’s not ignore the need to manage central bank balance sheets to enable such state contingency to take effect.
“There are times when we need to go big and go fast.”
The governor took over at the Bank in March and almost immediately oversaw a £300 billion bond-buying programme and a cut in interest rates to a record low of 0.1%.
He said that the bank still has a range of fiscal tools, including negative interest rates, and does not need to prematurely tighten monetary policy.
The markets were largely unmoved by the statement, with the value of sterling staying 0.6% up against the dollar at 1.327 throughout.