Deputy Bank of England Governor for Markets and Banking, Dave Ramsden, said his institution still has further stimulus available for the British economy if it proves necessary following the coronavirus crisis.
But he added that the Bank is not actively planning for negative interest rates, despite it being part of its toolbox of policy options. He also said it had not looked into the possibility of buying stocks to boost the economy, like other central banks across the globe.
"I'm not going to get into speculation about where we might be in November but we do have further headroom ... We do have headroom," Ramsden told CNBC's "Street Signs Europe."
The Bank of England on Thursday held its main interest rate at 0.1% and maintained its £745 billion ($975.8 billion) asset purchase target. The central bank offered a more optimistic short-term outlook, now projecting that GDP (gross domestic product) will shrink by 9.5% in 2020 compared to the 14% contraction projected in May, but warned that the U.K. economy will not return to its pre-Covid levels until the end of 2021.
"Our decision as of yesterday against this set of projections was that we didn't need to introduce any more stimulus, but what we did introduce was forward guidance to make clear that we won't be considering tightening policy until we see clear evidence that spare capacity that has opened up with the weakness of the economy is closing, and that inflation is rising sustainably back to target," Ramsden added.
British Finance Minister Rishi Sunak last month confirmed that the U.K.'s furlough scheme, which partially subsidized wages for millions of workers furloughed as a result of the pandemic, will end in October. The BOE now projects that unemployment will rise to around 7.5% at the end of 2020.
While acknowledging that the scheme had been essential in shoring up the economy to this point, Ramsden said the economy will now be "evolving and repurposing" in response to the crisis.
"As we move into the next stage of recovery, a lesson is that it is going to be important that we allow and enable that transition, in whatever form it is going to take, to take place, and therefore a subsidy scheme becomes less relevant," he said.
Ramsden suggested that new job creation will now be a key challenge, in terms of moving workers into these new roles amid the worst unemployment since the 2008 financial crisis.
He added that the restoration of the U.K. labor market will mean a "continuation of the current trend of redundancies," which will be "a very difficult situation for all those affected" but is a "consequence of the shock we are working with."
"On the monetary policy side, we can support that transition as best we can by keeping financial conditions as supportive as we can through our policy actions, but it is more for the authorities' actions, government policy actions, to enable that transition to take place, and for the structural change that the economy is going to have to go through to happen," he added.