BoE Chief Economist Andy Haldane said in a speech that Covid is “not a traditional cyclical shock” whose effects would eventually wash-out. It’s instead a “structural shock” with lasting implications for individuals behaviors and business model. The pandemic crisis “already flicked a digital switch”, on how we spend, work and save. The crisis has could has accelerated the changes and could “serve as a catalyst for faster innovation in the future”, he added. “What was a digital priority pre-Covid has, for many, now become a digital necessity.”.

On monetary policy, Haldane said one of the “most pressing issues” is the “zero (or close to zero) lower bound (ZLB) on interest rates.” ZLB arrives from a “technological constraint on the ability to pay or receive interest on physical cash, whether positive or negative. In principle, a widely-used digital currency could mitigate, if not eliminate, that technological constraint by enabling interest rates to be levied on retail monetary assets.” And, “the potential macro-economic benefits of easing the ZLB constraint appear to be significant.”

Full speech here.

BoE Deputy Governor Dave Ramsden said in a speech that the news of coronavirus vaccine is “clearly encouraging”, even if there is still “some way to go” before delivery of vaccinations. He added that the central bank’s forecasts of recovery in Q1 2021 was already based on assumption of waning direct effect of the pandemic. Hence, vaccine development doesn’t immediately warrant an upward revision to forecasts.

Still, “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 also reiterated that “negative rates remain in the toolbox” in the Q&A section. But, “they’re not something that we’re taking out of the toolbox and applying to the UK at present.”

Full speech here.