UK on track for V-shaped recovery, says Bank of England economist
|bbc.com 30 Jun 2020 at 10:23|
He said either consumer spending would ease unemployment or unemployment would cut household spending. Both could create virtuous or vicious cycles.
But at this stage, he said he could not tell which one would prevail.
So far, the economy is benefiting from robust strength in consumer spending, aided by many workers working from home or drawing 80% of their salaries through the government s furlough scheme.
"As the furlough scheme tapers from August, however, there is a risk this greater number of furloughed workers are not hired back by employers, adding to the unemployment pool," he said.
But he warned that the greatest risk was "a repeat of the high and long-duration unemployment rates of the 1980s, especially among young people".
Earlier this month, the Bank said the economy was on course for a contraction in the second quarter of about 20% compared with the final three months of 2019.
This is a record, but not quite as extreme as the 27% it predicted in May.
The Bank recently added £100bn to its bond-buying programme to help prop up the economy.
The extra monetary stimulus - known as quantitative easing (QE) - will raise the total size of the Bank s asset purchase programme to £745bn.
Mr Haldane voted against the increase. He said the recovery was happening "sooner and materially faster" than the Bank expected in May.
In his speech, Mr Haldane also pointed out just how much of the UK s financial system the Bank owns.
The new purchases "take the Bank s balance sheet to around 45% of 2019 UK GDP by the year-end, more than double its previous high-water mark", he said, outstripping the purchases made during World War Two, the South Sea bubble or the global financial crisis.