World News – CA – Bank boss: UK facing ‘unprecedented economic uncertainty’

Andrew Bailey, Director of the Bank of England (BoE), said the UK was facing « an unprecedented level of economic uncertainty »

Britain’s economy shrank 20% in the three months ending June as it battled the coronavirus pandemic, the steepest drop in any major advanced economy

M Bailey warned that there is a significant risk that economic growth will continue to be weaker than expected

The governor said in an online event on Sunday that he expected production at the end of the third quarter to be 10% lower than at the end of 2019

« Of course this is accentuated now by the return of Covid the risks remain very strongly biased downwards », he said during the videoconference for central banks, which was organized by the Group of Thirty , a panel of economic decision-makers and senior bankers

M Bailey said it was better for policymakers to act aggressively, rather than cautiously, in the face of uncertainty,

He also touched on the ongoing debate over setting negative interest rates, which would bring the cost of borrowing below zero

« Based on our assessment of negative interest rates, based on experience elsewhere, they probably seem to work better in a bigger financial market environment, and probably better in an emerging economic recovery, » said he declared

If interest rates are negative, the BoE charges all deposits it holds on behalf of banks This encourages banks to lend money to businesses rather than deposit it

But with interest rates already low, it’s unclear to what extent negative rates would help spur new activity

At the same event on Sunday, the head of the International Monetary Fund (IMF) spoke of growing concerns over the sharp rise in debt levels in the poorest countries

In April, officials from the « Group of 20 » (G20) countries with the largest and most dynamic economies agreed to suspend debt repayments and interest from the world’s poorest countries until ‘at the end of the year

The G20 Debt Service Suspension Initiative has helped 44 countries defer $ 5bn (£ 3.8bn) in repayments to be spent to tackle the coronavirus crisis

However, IMF Managing Director Kristalina Georgieva said urgent action was still needed in the form of debt restructuring

« We are saving time, but we have to face reality: much more decisive action awaits us, » she said « To do too little and too late is costly for debtors, also costly for creditors »

She added that global debt levels are expected to reach 100% of gross domestic product in 2021

In early October, the IMF said the world economy was still in deep recession, despite predicting a global economic contraction of 44%, which is more moderate than expected in June

He warned that most economies will suffer lasting damage and that extreme poverty will likely increase for the first time in more than 20 years

Bank of England, Andrew Bailey, Finance, Central Bank, UK