- BoE’s MPC member Saunders: Elevated unemployment would be sign that UK has too much spare capacity, would push inflation below target
Market news
18 February 2021
BoE’s MPC member Saunders: Elevated unemployment would be sign that UK has too much spare capacity, would push inflation below target
- UK economy has significant spare capacity
- Jobless rate in the UK has risen markedly
- Unemployment to rise when furlough ends
- 5 million jobs are estimated to be furloughed
- Furlough has helped to limit unemployment level
- I see factors that could cause slow, incomplete recovery
- Risks include household caution over spending, fears of unemployment
- Even when UK economy regains pre-crisis size, it may still have spare capacity
- Cutting interest rates below zero would be the most effective way to lower yield curve in financial markets, which drives borrowing costs
- But BoE do not need to decide yet on negative rates
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