March 11, 2021

Bache - Speech on central bank digital currency

Deputy Governor Ida Wolden Bache gives a speech about central bank digital currency on a Nordea Markets webinar.

March 08, 2021

Bailey - Getting over Covid

  • "so-called longer-term scarring damage to the economy will be more limited than in some past recessions"
  • "illustrating the shock through a calculation of the output gap alone isn’t very helpful, precisely because it is the net of two shocks... For a monetary policy maker interested in the output gap and how it will evolve in the recovery from Covid, it is clear we need to focus on the recovery of both supply and demand. More so than usual, the recovery from Covid requires a recovery of the supply side. Some of the effects on supply directly related to restrictions on activity and voluntary social distancing are likely to be temporary, and should start to reverse as the health outlook improves and along with the vaccination programmes enable restrictions to be eased. Changes in supply due to so-called scarring and structural change are though likely to be more persistent."
  • "variation in skills demanded by employers across industries has probably shrunk in a more service oriented economy, which would assist transition where it is needed. And second, policy intervention, particularly the furlough scheme, will help to preserve viable employment going forwards, and skills specific to particular jobs or companies, which is a good thing. Ahead of its May Monetary Policy Report, the MPC will assess the impact of the extension of the furlough and related schemes, announced in last week’s Budget. My expectation would be that this is likely to reduce the peak level of unemployment over the coming months. However some rise in unemployment as the scheme tapers will be hard to avoid."
  • "Firms in the DMP estimated that Covid has increased average unit costs by around 7% in the second and third quarters of last year. They expected this impact to reduce to 5% by the second quarter of this year, with a more persistent negative impact of 2%. All of this reflects new costs – for PPE, screens etc., and the impact on costs from social distancing reducing capacity."
  • "I see reasons to believe that the longer-term negative economic effects of the Covid shock will be smaller than we have seen in the past, particularly in the 1980s and early 1990s... it seems likely that task and job reallocation and capital redeployment has increased since then, for instance because workers will need less significant retraining to move between sectors. In our assessment, the supply capacity of the economy is expected to be around 1¾% lower than it otherwise would have been in the absence of Covid by the end of our forecast period."
  • "investment is also needed to support the transition required by climate change and the necessity of enabling a more digital economy. These are challenges and opportunities."
  • "we will continue to execute the announced programme of asset purchases, which we expect to be completed by around the end of 2021."
  • "We have been quite clear these toolkit decisions should not be interpreted as a signal about the future path of monetary policy. We decided to ask the banks to make preparations within the next six months, in case we need to use negative interest rates to provide further support. This implies nothing about our intentions in that direction, and nor does it imply that negative rates are our chosen marginal policy tool, something that in my view is state contingent at all times. We also signalled that the Bank will do work on the approach it would take to tightening policy, should that be needed, again recognising that it has more than one tool to do so."

March 05, 2021

Bache - Reception of the report from Norges Bank Watch (NBW)

Remarks by Ida Wolden Bache, Deputy Governor of Norges Bank