U.K. Recovery Still Looks V-Shaped, BOE’s Haldane Says

(Bloomberg) -- The U.K.’s recovery is still looking V-shaped and the economy has clawed back about half the output it lost in March and April, Bank of England chief economist Andy Haldane said Monday.

“This plainly has been a recovery and a pretty sharp one,” he told lawmakers on Parliament’s Treasury Committee. “As has been the case of course globally -- in that sense we have seen a bounce-back, so far it has been a V. That does of course not tell us where we might go next.”

Haldane dissented at the BOE’s June meeting, voting against expanding asset purchases. He’s since come across as more upbeat about the economy than Governor Andrew Bailey and fellow policy maker Silvana Tenreyro, who also addressed lawmakers.

She said the economy has rebounded as businesses reopened after the lockdown, but the question is how much of that will be “interrupted” by factors weighing on consumer and business demand.

Explaining her different view compared with Haldane, she said that some of the issues he cites as risks are part of her central forecast.

“Spending in many sectors is going to suffer because of perceived health risk,” she said. “This will in turn feed into higher unemployment and lower incomes, and there will be spillovers to other sectors.”

Haldane also noted the threat of rising joblessness, and said that labor market figures are “understating the unemployment problem.”

We’re “by no means out of the woods on activity or jobs, but materially better than expected two or three months ago,” he said.

BOE officials will publish updated forecasts at their next policy meeting on Aug. 6. They have been reviewing tools at their disposal, including negative interest rates, after cutting rates to a record low 0.1% and expanding their bond-buying program.

“There is plainly less room for monetary maneuver as a result of this crisis, be that interest rates or further QE,” Haldane said. “But less room for maneuver is not no monetary maneuver at all.”

Negative interest rates could potentially encourage further borrowing, though they would also have downsides like a squeeze on banks’ margins, he said.

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