It’s day three in the job for the new Governor of the Bank of England. Andrew Bailey has walked straight into an emergency, triggered by the outbreak of the coronavirus.
The spread of the virus and the measures imposed to contain it are forcing the economy into a state of hibernation. The fight now is to ensure that as many people and businesses emerge from it unscathed.
Yesterday, the chancellor said the UK had "never in peacetime faced an economic fight like this one," and Bailey agrees.
The newly appointed Bank of England governor told me: "The best case scenario is a very pronounced but sharp and quite short lived downturn, something V-shaped that doesn’t persistent, and a rebound repairs a lot if the effects of the downturn.
"That’s best case but I would emphasise there is so much uncertainty around that we’re revising our views on it constantly."
The best case is grim. A recession of some sorts looks unavoidable.
Some economists talk of an immediate hit to growth of 15 per cent of GDP. That's unheard of in peace-time. Bailey helped lead the Bank’s response to the last downturn, he won’t go beyond saying that this economic shock will be “severe” and, he hopes, "temporary".
The rescue package that the Bank of England and the government unveiled last week and expanded yesterday is designed to keep businesses in business and people in work.
In the space of seven days, £12 billion of taxpayer support has turned into £350 billion. Bailey says the scale of support on offer is unprecedented and that the Bank is prepared to go further, pumping unlimited money into the economy if necessary.
New governor Andrew Bailey says Bank of England will do what is necessary to help UK businesses survive the coronavirus outbreak
He said: "I think we now got a big tool kit for businesses and let also say for the people of our country. It’s for employment, it’s for people livelihoods, that’s paramount. The chancellor was very clear yesterday, he is going to do more. And if we conclude more action is require we’ll do it."
Bailey insists that the loans and the mortgage holidays which are on offer to households and business will get to the people need them. There will be “no excuses” he said for banks not passing the benefits on in full.
Much of the support is in the form of taxpayer-backed lending. Some businesses argue they don‘t want to borrow more, what they need is cash.
The French government has pledged to under-write company payroll. Bailey refuses to be drawn on whether he thinks the UK government should do the same.
“I think [the chancellor] has already made clear there are some areas he will come back on...He made quite clear that one of areas is employment measures,” Bailey told me.
The scale of support on offer is extraordinary and yet the best efforts of central banks and governments are failing to calm the financial markets.
Investors are dumping company shares and even government bonds. Asset are being offloaded for cash. The message seems to be that the measure to-date are inadequate. Bailey disagrees.
“I think that markets recognise how tight the challenge is, they have not lost confidence,” Bailey insists. "We will respond to the news we get. We are not out of what I call 'firepower' at the moment."
What more could the Bank of England do? In the past it has created money and used it to buy both government and corporate debt. The Bank could decide to create money and put it directly into the pockets of businesses and workers. This hasn’t been done before and would probably be viewed as something that the government should lead on, but nothing is off the table.
Twelve years ago, the banking system was the threat to the economy; today Bailey insists that banks are in position to support economy.
“We been running stress-tests for quite a few years. Those stress tests are hugely important because they tell us what the banking system can stand, what its buffers are, what it’s support is.
"We can put all the [latest] news up against the stress tests. We are still in the zone I can assure you where the banking system can stand up to it.”
Investors are dumping company shares and, more worryingly, offloading some government debt. In these extraordinary times, they seem to prefer holding cash.
An economic shock could overwhelm the financial system but at the moment the Bank of England is satisfied the banking system can cope.
Coronavirus: Everything you need to know