Bank of England Governor Andrew Bailey warns against V-shaped recovery hopes
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The governor of the Bank of England today appeared to warn against the optimism of his own chief economist who has declared there would be a "V-shaped" recovery in the economy post-Covid.
Andrew Bailey warned: "I'm always a bit nervous about using letters to describe recoveries," adding that the coming months were "a very big question around what I tend to call natural caution."
He said the rebound would depend on how quickly people return to work and go shopping and dining out in restaurants.
His words put clear blue water between him and chief economist Andy Haldane who has controversially claimed there would be a V-shaped bounceback.
Bailey's comments follow the scepticism of fellow interest rate setter Silvano Tenreyro who earlier this week a lso cast doubt on Haldane's optimism. She said the return would be more like an "incomplete V" due to an increase in unemployment and consumers' wariness about going out and spending for health reasons.
Haldane said the recovery would depend on the progress of medical companies in finding cures and vaccines for the virus and the impact and severity of second waves of outbreaks.
He said the economy had probably contracted by between 23% and 25% in the second quarter of the year but was bouncing back in some sectors such as new car sales and housing. Hospitality and entertainment sectors are still struggling, he noted.
This week saw the government's fiscal guidance from the Office for Budget Responsibility predict unemployment was likely to spike to 12% before Christmas from the current level of 3.9%.
Data this week also showed a 650,000 plunge in the number of people in work.
The importance of people returning to their offices and other workplaces to spend in neighbouring shops, cafes and bars is a matter of growing concern in government.
Boris Johnson has said he hopes people will return to work, although his chief scientific adviser Sir Patrick Vallance yesterday warned there were no reasons to stop the guidance that people should keep working from home.
Johnson today said the advice on working from home would be cautiously relaxed from 1 August, giving employers discretion on whether to ask staff to come back to the workplace.