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Bank of England chief economist warns against extending furlough programme
[LONDON] Bank of England chief economist Andy Haldane warned against extending the UK government's flagship coronavirus furlough programme.
Continuing with state support for jobs threatened by the pandemic risks preventing a "necessary process of adjustment," Mr Haldane said in a City A.M. podcast published late on Monday.
"Keeping all those jobs on life support is in some ways prolonging the inevitable in a way that actually doesn't help either the individual or the business," he said. "Our job as policy makers is to make that process of adjustment as seamless and as painless as possible."
With Germany extending its equivalent programme until the end of 2021, and France also considering an extension, Chancellor of the Exchequer Rishi Sunak has come under pressure to continue subsidising wages beyond Oct 31, when the job support programme is scheduled to end.
The BOE forecasts that unemployment could almost double to 7.5 per cent by the end of the year.
Mr Haldane suggested UK firms should look to wage restraint or reduced hours as a "less painful way of adapting" than job cuts.
On the economy, he said he was "probably a touch more optimistic" than a number of his colleagues on the BOE's nine-member Monetary Policy Committee.
BOE Governor Andrew Bailey was one of several rate setters to paint a downbeat picture of the economic outlook last week, saying risks remain to the downside.
"Right now the prevailing narrative is a bit gloomier than I think is justified by the data," Mr Haldane said. "I am, I hope, more open minded about what lies ahead both economically and policy wise."