BOE's Bailey Says Fiscal Policy Risks Becoming Less Effective

AI Summary

Bank of England Governor Andrew Bailey warned that governments’ ability to use fiscal policy to counter economic downturns is being weakened by slower growth and repeated shocks. He made the remarks at an event in Turkey, arguing that more frequent shocks could make countercyclical policy difficult to sustain.

Bank of England Governor Andrew Bailey warned that governments may be left helpless in the event of another downturn as their firepower is sapped by weak growth and a series of severe shocks. "Fiscal policy can operate as a countercyclical tool of policy," Bailey said at an event in Turkey. "But if the negative shocks come at higher frequency, and underlying growth in the economy is lower, countercyclical policy becomes very difficult to follow successfully." (Source: TCMB Istanbul Economic Forum)