BoE's Ramsden sees possible plus for economy from vaccine news

LONDON (Reuters) – Bank of England Deputy Governor Dave Ramsden said on Tuesday that positive news about COVID-19 vaccines could help to reduce the risks facing Britain’s economy but the central bank was unlikely to revise up its forecasts as a result.

FILE PHOTO: Bank of England Deputy Governor for Markets and Banking, Dave Ramsden attends a Bank of England news conference, in the City of London, Britain November 1, 2018. Kirsty O’Connor/Pool via REUTERS

Announcements over the last two weeks that two vaccines were effective in trials have raised hope that COVID-19, which has infected 54 million people worldwide and killed 1.3 million, will be largely defeated over the coming year.

“Assuming the recent positive developments do translate into delivery of vaccinations, then they could … bolster resilience and mitigate some of the risks of long-term scarring,” Ramsden said in an online speech hosted by the University of Nottingham.

Still, Ramsden said the news on vaccines would not necessarily result in an upgrade to the BoE’s economic forecasts, since they already included an assumption that the effect of the pandemic would gradually wane.

The BoE this month increased its bond-buying stimulus plan by a further 150 billion pounds, something Ramsden said would act as a bridge for the economy.

He made no mention in his speech of the possibility of the BoE cutting rates below zero, the subject of a feasibility review by the central bank.

Ramsden repeated the view of Governor Andrew Bailey that the economy might emerge less scarred by the pandemic than following the huge shifts in the industrial makeup of Britain’s economy that took place through the 1980s and 1990s.

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“That is because the tasks which will have to change are within sectors like services and retailing, rather than between sectors,” Ramsden said.

However, the future onus on digital skills could hurt lower-earning workers.

Ramsden reiterated the BoE’s guidance that there would be a high bar for any future tightening of monetary policy.

“We stand ready to take whatever additional action is necessary to achieve our remit of meeting the 2% inflation target in a way that helps to sustain growth and employment,” he said.

Ramsden predicted that most of the spending that drives Britain’s economy would eventually revert to pre-pandemic patterns.

“But that process could take a long time, depending on how the healthcare response to COVID progresses,” he said.

“And some of the changes may persist for much longer if consumer tastes are changed: people may prefer to travel for work or tourism less often in the future, and may well continue to buy more online.”

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