- BoE’s Haldane doesn’t expect bankruptcies to increase
- “Significant risk” inflation could miss its target
- Broadbent says BoE’s ‘easing bias’ is now less pronounced
LONDON, May 7 (Reuters) – The Bank of England does not expect to see a wave of bankruptcies among British businesses when the government ends its emergency coronavirus support for the economy, said Friday the chief economist of the BoE, Andy Haldane.
Many of the debts recently accumulated by companies are spread over long durations “which increases the chances that they can be repaid and, therefore, bankruptcy does not recover much from the current relatively low levels,” said Haldane.
“But at the end of the day there are risks around that and we will have to follow them,” he said in a business presentation, a day after the BoE sharply increased its forecast for UK economic growth in 2021.
Data released last week showed business bankruptcies in England and Wales fell to their lowest level in more than 30 years at the start of 2021, with government support helping businesses avoid bankruptcy.
Haldane also said there were “significant risks” that inflation would be higher or lower than the BoE’s latest forecast. They predict that inflation will be close to its 2% target in two to three years, after initially exceeding as the economy recovers from the pandemic.
“Currently we see these (risks) as being largely symmetrical, but they are important on both sides and there is no escaping them given the current economic situation,” said Haldane.
BoE Deputy Governor Ben Broadbent, speaking alongside Haldane, said policymakers were less likely to ease their policies than they thought three months ago.
“The easing trend that we could have had is less pronounced,” he said.
Broadbent noted a change in the minutes of the BoE’s Monetary Policy Committee, which said Thursday: “The MPC would continue to monitor the situation closely and take whatever steps are necessary to accomplish its mission.”
In March, the passage read: “If the outlook for inflation weakens, the Committee stands ready to take any further steps necessary to accomplish its mission.
“It gives you an idea of how some of the downside risks – although they’re still there – have gone down,” Broadbent said.
Reporting by David Milliken Writing by William Schomberg
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