The new governor of the Bank of England has promised to take “prompt action again” to limit the damage to the economy caused by Coronavirus.
Andrew Bailey, who replaced Mark Carney as the head of the UK’s central bank on today (Monday), was speaking after the US Federal Reserve slashed interest rates to nearly zero and pumped $700 billion into the US financial system.
Mr Bailey described the Fed’s move as “a step forward”.
He said: You saw some pretty big dislocations in financial markets last week, in particular in dollar financial markets which of course are global by nature.
“So the fact that the Fed, with the other central banks have extended swap lines so we can provide essentially three-month dollar money. Dollar money is a step forward.
“We’re going to see how that works its way through the markets today in the coming days to see what the effect it has, but I would emphasise that this is strong coordination among central banks.”
Mr Bailey said the Bank expects the impact on the economy to be “large, sharp but temporary”.
The Bank of England is consulting with epidemiologists to assist in assessing how significant the economic impact will be.
The governor said: “There’s two parts. First of all, of course, is how long Covid itself is going to go on for, obviously that’s not something that as a central bank, we have an expertise in. We’re working very closely with epidemiologists to understand that. That will obviously have an effect on the economy, no question about that.
“The second part – which we emphasised last week – which we are very keen also to ensure doesn’t happen is that the economic effects that materialise during the period of Covid then get extended onwards by virtue of effectively the damage that’s done to the economy and that’s something that we want to want to minimise and stop. And that’s why you saw prompt action last week.”