UK Weighs COVID Impact On Recovery

The economic impact from the pandemic has gradually faded since the start of the world health crisis but still remains strong according to statements by Bank of England Governor Andrew Bailey on Wednesday, when asked how to assess news of the Omicron variant of coronavirus.

Financial markets have pared back their expectations of a Bank of England rate rise on Dec. 16 since information emerged about the new variant last week, and now see a two thirds chance of a rate rise, down from three quarters before.

“Direct economic effects of COVID have attenuated a lot since the fall in GDP in the second quarter of last year, when we went off a cliff,” Bailey said.

“However, there are still impacts that we are feeling from COVID quite strongly,” he added in a question and answer session hosted by Britain’s Institute and Faculty of Actuaries which focused mostly on insurance regulation.

British consumer price inflation hit a 10-year high of 4.2% in October and the BoE expects it to reach around 5% in the second quarter of 2022.

Bailey noted the inflationary pressure from supply chain difficulties and increased demand for consumer goods instead of services during the pandemic.

“Even now, services are recovering but we have still got quite a long way to go. That has put quite a strain on supply chains around the world,” he said, adding that the manufacturing and shipping of goods from east Asia could be disrupted by more lockdowns.