MNI POLICY: BOE's Haldane-UK Recovery So Far Is V-Shaped

--BOE Haldane: UK Recovery Faster Than Bank Economists Had Expected

--High Under Employment And Unemployment Key Downside Risk

--BOE Haldane: MPC Hasn't Discussed Sequencing Of QE Unwind

By David Robinson

     LONDON (MNI) - The UK's economic recovery has so far been V-shaped and

faster than anticipated by the Bank of England's Monetary Policy Committee in

its scenario published in May, the BOE's Chief Economist Andy Haldane said on

Tuesday.

     Citing high-frequency indicators, Haldane, who alone on the MPC voted

against increasing quantitative easing at the June meeting, said the key driver

appeared to be underlying demand rather than easing of lockdown restrictions.

     "My reading of the evidence is 'so far, so V'," Haldane said, adding that

the UK was now out of the first phase of dealing with the initial crisis shock

and financial market turbulence, and into the second phase, of recovery.

     "The UK recovery is more than two months old, while the global economy is

perhaps three months into its recovery," Haldane said.

     "What those fast indicators point towards is recovery in both the UK and

globally having come somewhat sooner and having been materially faster than in

the MPC's May MPR scenario [and] sooner than any other mainstream

macro-forecast."

     But perhaps half of the UK workforce is unemployed or under-employed,

Haldane said, pointing to what he described as a key downside risk to

sustainable recovery.

     Over nine million jobs have been furloughed, with staff staying on payrolls

but not working, while benefit 'claimant count' unemployment has risen by over

1.5 million since the start of 2020, 2.5 million self-employed workers are on

income support and as many as eight million workers are working fewer hours.

     This risked creating a downward spiral, in line with John Maynard Keynes

'paradox of thrift', with business and private consumption hit by pessimism as a

result of joblessness, resulting in higher joblessness, said Haldane, although

he added that further policy action might not be needed unless downside

scenarios materialise.

     In the question-and-answer session, Haldane was asked about Governor Andrew

Bailey's view that asset purchases could eventually be unwound before the policy

rate was raised. This was the governor's personal view, he said,

     "I absolutely sympathize with his view that the rise in the Bank's balance

sheet should not be indefinite. There should not be a one-way ratchet (but) ..

Truth be told we are some way away, I think, from contemplating any tightening

of policy any time soon and in that sense the point is rather moot and it also

the case that the MPC, partly for that reason, hasn't discussed it yet," Haldane

said.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,M$$BE$]