Bank of England keeps rates unchanged
British central bank announces a further £100bn of stimulus
The Bank of England (BoE) maintained its key interest rate at its current level of 0.1 per cent on Thursday.
At its June meeting, the Monetary Policy Committee (MPC) of the UK’s central bank voted unanimously to keep rates at historic lows and voted 8-1 in favour of an increase to its stimulus programme.
With the easing of the most severe lockdown measures and a marked drop off in new Covid-19 infections, the British economy is now expected to shrink by around 20 per cent in the first half of 2020, instead of the 27 per cent previously predicted.
MPC admitted that recent data indicates that the fall in UK GDP in the three months to the start of July “will be less severe” than predicted at its May meeting, but stated: “It is difficult to make a clear inference from that about the recovery thereafter. There is a risk of higher and more persistent unemployment in the United Kingdom.”
The BoE’s governor, Andrew Bailey, similarly stressed: “We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.”
A sign of these strange times can be found in Bailey’s admission that the Bank is not only considering cutting rates to zero for the first time in its 326-year history but has also not ruled out introducing negative interest rates. Although by the governor’s own admission: “It is not a decision that is in any sense imminent.”
The additional £100bn ($123bn, €135bn) in quantitative easing approved by the MPC will bring the bank’s total level of stimulus to £745bn.
On Friday morning, Britain’s public debt to GDP exceeded 100 per cent for the first time since 1963.
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