Avoiding Economic Anxiety Speech given by Andy Haldane Chief Economist and Member of the Monetary Policy Committee (MPC)  Cheshire and Warrington LEP Economic Summit Webinar 30 September 2020  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Jack Meaning and Andre Moreira for their help in preparing the text. I would like to thank Andrew Bailey, Frances Cassidy, Alan Castle, Shiv Chowla, Liam Crowley-Reidy, Jon Cunliffe, Harvey Daniell, Pavandeep Dhami, Simon Hayes, Saurav Kamath, Zaar Khan, Simon Kirby, Nick Mclaren, Becky Maule, Shahid Nazir, Mette Nielsen, Douglas Rendle, Michael Saunders, Michal Stelmach and Jan Vlieghe for their comments. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Thank you for the invitation to speak at this Cheshire and Warrington Local Enterprise Partnership (LEP) Economic Summit. Through my colleague on the Industrial Strategy Council and former Chair of the LEP, Christine Gaskell, I know the excellent work the LEP does in supporting the local economy and community. That support has never been more important given the risks facing individuals, businesses and communities. Given those risks, I thought I would focus today on the economic outlook in the UK, updated in the light of events since the publication of the Bank’s Monetary Policy Report in August. Plenty has since happened. But one factor has remained the same: the extra-ordinary degree of uncertainty about the economic outlook.
Chart 3: Consumer confidence and spending 10 Percentage change on 19Q4 5 Retail Sales (LHS) 0 -5  Headline Consumer Confidence (RHS)  Percentage point difference on 19Q4  Chart 4: UK Misery Index  10 5  Misery index  16  Forecast  14  0  12  -5  10  -10  -10  -15  -15  8 6 4  2022  2020  2018  2016  2014  2012  2010  2008  0  2006  -25  2004  -25  2  2002  -20  2000  -20  Sources: GfK/EC, ONS. Sources: ONS and Bank calculations  Notes: Headline consumer confidence is based on the  Notes: Index is summation of the unemployment rate and  average of five survey balances: general macroeconomic  inflation rate. Forecast is based on projections in Aug 2020  situation over the past 12 months and expectations for the  Monetary Policy Report. next 12  If the public do have an exaggerated sense of the risks they face, what might be its source? Psychological studies suggest it may reflect behavioural biases inherited from our hunter-gatherer past. Humans tend to over-estimate systematically risks that are systemic or existential to lives and livelihoods.4 This “dread risk” causes excessively cautious behaviour, sometimes with harmful side-effects – as when the exaggerated fear of flying after 9/11 caused more people to drive.5 These exaggerated risk perceptions are often amplified by others’ words and actions. Caution is contagious.