By Andy Bruce
LONDON (Reuters) – Bank of England Deputy Governor Ben Broadbent said on Wednesday that policymakers may need to give extra help to Britain’s businesses until the disruption from the coronavirus outbreak has passed.
The virus could have a “very significant” impact on the economy, he said, although past episodes suggested this could be a temporary hit that should not affect the long-term future of businesses as a whole.
“Precisely for that reason, there may therefore be a role for economic policy to support activity and the provision of credit in the meantime, in order to ensure that short-term disruption doesn’t result in longer-term damage,” Broadbent said in a speech at London Business School.
Broadbent’s view chimed with comments earlier on Wednesday from Andrew Bailey, the next governor of the BoE.
While Bailey said financial help was needed quickly for companies whose operations have been disrupted by the disease’s spread around the world, he added that the BoE should wait until it has more clarity about the hit from the coronavirus outbreak before making any decision to cut rates.
The U.S. Federal Reserve cut interest rates on Tuesday, in its first emergency rate cut since the financial crisis, and the Bank of Canada acted similarly on Wednesday.
“For the (Monetary Policy Committee) what matters most in this respect will be the potential medium-term impact on inflation,” Broadbent said in his speech.
He said the BoE would continue to monitor coronavirus developments and consider any policy response as appropriate.
The number of confirmed coronavirus cases in Britain rose to 85 on Wednesday in the biggest daily jump since it was first detected in the country, health ministry figures showed.
The bulk of Broadbent’s speech concerned the risks of underestimating central banks’ power to influence inflation, and rejecting talk of “monetary impotence” in the face of long periods of low inflation in major developed economies.