The Bank of England’s chief economist said there was a risk that overly pessimistic “Chicken Licken” views about the impact of Covid-19 would hold back Britain’s economic recovery from the pandemic.
In a speech given today, Andy Haldane said that authorities such as the BoE have a “public responsibility to avoid economic catastrophizing” during the coronavirus crisis.
“Encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken,” he said, citing the tale of a bird who worries the sky is falling in after an acorn lands on his head.
Haldane, who has consistently been the most optimistic voice among the BoE’s rate-setters since the lockdown, said none of the conditions that would justify taking interest rates negative had been met.
His comments come after fellow rate-setter Silvana Tenreyro said last week that the Bank had seen “encouraging” evidence that negative rates could help the British economy weather the downturn caused by the pandemic.
In his speech, delivered online to Cheshire and Warrington Local Economic Partnership body, Haldane acknowledged that Britain faced an “unholy trinity of risks from Covid, unemployment and Brexit”, but added it was important that the economy’s quicker-than-expected recovery so far was not overlooked.
“The economy has recovered further and faster, and has shown far-greater robustness and resilience, than anyone expected,” he continued. “This positive news has received less attention than it deserves, both on its own terms and because of what it may tell us about the economy’s resilience to future shocks.”
“My concern at present is that good news on the economy is being crowded-out by fears about the future,” Haldane said.
“This is human nature at times of stress. But it can also make for an overly-pessimistic popular narrative, which fosters fear, fatalism and excess caution. This is unhealthy in itself but, if left unaddressed, also risks becoming self-fulfilling.”