LONDON (Reuters) – Bank of England interest rate-setter Silvana Tenreyro said removing fiscal or monetary policy support for the economy too early after last year’s coronavirus slump could have a damaging effect on the labour market.
“One lesson that we learned from the financial crisis is that withdrawing policy support too early can be very costly,” Tenreyro said in an online discussion hosted by Swedish think tank SNS.
“Withdrawing it too early … can lead to scarring effects on the labour market that would be very costly and slow down growth going forward,” she added.
The BoE last year cut rates to a record low of 0.1% and doubled the size of its bond-buying programme to 895 billion pounds ($1.23 trillion). Tenreyro argued in late 2020 that the economy might benefit from cutting rates below zero.
Since then, Britain has made fast progress with its COVID-19 vaccination programme, raising the prospect of a bounce-back for the economy this year and in 2022.
Tenreyro said it was not yet clear whether Brexit had given Britain an advantage with its vaccination programme, which it has rolled out faster than countries in the European Union.
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