The prediction marks a more positive trend upwards for the economy, after months of fears about prolonged recession. Andy Haldane said there has already been a “modest recovery” in spending and business confidence according to real-time indicators.
Mr Haldane argued that early signs such as surveys are “coming in a shade better” than the Bank’s scenario, which already predicted a V-shaped recovery in activity where little long-term damage is done to the economy.
Mr Haldane said in an online talk organised by the Confederation of British Industry: “The reason it was atypically sharp and severe on the downswing are the same reasons we would expect it to be atypically strong on the upswing, as and when we see the opening of the economy.
“It’s perhaps still a V but it’s a relatively lopsided V, and the risks to that probably lie to the downside.”
Mr Haldane also said the Bank is not “remotely” close to a decision on negative interest rates after a week of fierce speculation on financial markets.
The Bank of England governor, Andrew Bailey, said central bank officials were actively considering all options to help see the economy through a deep recession and told MPs that it would be “foolish” to rule out cutting the cost of borrowing to below zero.
He confirmed that the Bank’s rate-setters are reviewing the controversial policy in which banks would be charged for hoarding cash rather than lending it out.
Fears surround the policy as it has been seen as counter-productive.
Other economists have warned that deeper scarring from job losses and business failures will mean a slower recovery.
Peter Dixon, an economist at Commerzbank’ said there will be permanent harm which hits the labour market and public finances.
He predicted output will not return to pre-recession levels until 2023, much later than the Bank’s assumptions.
Mr Haldane did warn the economy could suffer from a “paradox of thrift”, when cautious consumers and businesses increase their savings in the face of recession, unless the Government can instils confidence in businesses and households.
In other news, Chancellor Rishi Sunak has begun considering an end to self employment support programmes and the furlough scheme.
According to sources close to the discussions, a decision on whether to extend the self-employment income support scheme (SEISS) beyond May is expected to be made within days, with a sudden stop to the grant is still on the table.
Meanwhile the Treasury is reportedly preparing to stop accepting new applications for the furlough programme.
The self-employment scheme, which pays two million people up to £2,500 a month, is due to end in five days’ time.