Andrew Bailey: The hard yards

Speech by Mr Andrew Bailey, Governor of the Bank of England, at the Society of Professional Economists Annual Dinner, 27 September 2021.

Central bank speech  | 
28 September 2021

I am going to speak this evening about the state of the economy and about monetary policy as the recovery from Covid unfolds. The title of this speech, The Hard Yards, is I think a saying that originated in sailing, though I associate it more with forward play in rugby. I remember saying, around a year ago when the recovery looked rapid, that the hard yards were yet to come, and while I don't want to claim any great prescience, it appears to be turning out that way. Nor do I have any claim to originality – Milton Friedman and Anna Schwartz wrote in their monetary history of the US that the most notable feature of the revival of the US economy after 1933 was not its rapidity but its incompleteness.

I, and other MPC members, have also used the analogy of a bridge to describe the role of economic policy in the age of Covid, the bridge to the other side of Covid. We are still on that bridge.

The rate of recovery has slowed over recent months, and that slowing is continuing. Relative to the fourth quarter of 2019, on the latest data to July, the level of GDP was 3.5% lower. That's around one percentage point below the level consistent with the August Monetary Policy Report. There is a crucial distinction here between growth rates and levels of activity. It is inevitable in a bounce-back that the growth rate will slow as the recovery nears its end-point. It is not though inevitable – or desirable – that the previous level is not regained.