The furlough scheme has been the central tenet of the government’s economic response to Covid-19 and it has been highly effective, both in limiting the hit to jobs while also setting the UK up for a strong recovery once restrictions on activity can be lifted. Data from the Office for National Statistics show that in the first three quarters of last year, UK households saved more than in the previous two years combined. Once savings are put to work by consumers seeking to make up for lost time, we expect activity to bounce back strongly. Absent another virus-related shock, an economic rebound should take the pressure off the Bank of England to deploy more stimulus and the prospect of negative interest rates is receding.

UK unemployment rate, %