MNI POLICY: BOE Haskel - Fear Recovery Could Get Get Stuck

-Progress Of Disease Key Alongside Easing Lockdown: Haskel

-Perceived Chance Of Infection Key To Consumer Behaviour

     LONDON (MNI) - There is a growing concern that damaged confidence could

result in the UK's recovery "getting stuck" after the lockdown is lifted, with

evidence that the dominant effect from the Covid-19 pandemic on the economy will

be a hit to demand, Bank of England Monetary Policy Committee Jonathan Haskel

said Thursday.

     Voluntary social distancing would continue to weigh on recovery, with the

progress of the disease crucial to how consumption fares, Haskel told an

Imperial College event.

     He expressed concern that the economy would not self-correct. "If we

release the lockdown somewhat prematurely .. then we have this very difficult,

somewhat self-defeating, cycle," he said in the question and answer session.

     --INFECTION LEVELS

     "If we release the lockdown early you think 'oh, that will be good for

activity wouldn't it? But then more people get infected and people hold

themselves back. So what is crucial in this is people's expectations for public

health provision," Haskel added.

     Haskel noted that the UK infection rates were at the top of the charts

among advanced economies before the various jurisdictions started easing

lockdown and he argued that these infection levels matter a lot for consumer

behaviour and the path of recovery. "It is not just the lockdown, it is the fear

of infection that matters," Haskel said.

     Recent data from the Office for National Statistics showed, for example,

that almost exactly half of respondents said that they would be uncomfortable

indoors at a restaurant, highlighting the continuing struggling for sectors

dependent on social spending.

     "For the recovery, I would put weight on the logic that suggests that as a

behavioural response to the supply shock, cautious consumers, worried about

unemployment and health risks, will hold back the economy, he said in his

speech.

     He also highlighted how diverse the impact of Covid has been with the

earnings and employment of the less well-off hit hardest and he warned that as

their behaviour influences others economic fortunes, the problems may not be

self-correcting without policy support

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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