BoE pumps an extra £100bn into the economy
The Bank of England (BoE) has announced a new stimulus package for the economy in an effort to mitigate against the impact of the coronavirus crisis and lift inflation from the current 0.5% and closer to the 2% target. The Bank confirmed a fresh £100bn in quantitative easing, with this following a £200bn boost announced in March. The £100bn added yesterday takes the BoE’s asset-purchasing programme to £745bn, a figure equivalent to around a third of GDP.
BoE governor Andrew Bailey said the pace at which bonds would be purchased will be slower than in the previous period as financial markets are far calmer than three months ago, saying: “We are slowing from warp speed to something that by historical standards still looks fast.” The Bank’s Monetary Policy Committee (MPC) also voted to keep interest rates at the historic low of 0.1%. On the immediate state of the economy, the Bank said there are signs of a post-lockdown increase in consumer activity, with this coming in the current quarter when the Bank had anticipated it would be Q3 before evidence of an upturn. The Bank said it now expects the economy to contract by 20% in the first half of the year, having previously suggested a 27% reduction was on the cards. Andy Haldane, the Bank’s chief economist, said if the recovery in demand and output continues, the loss of output due to the pandemic may be half that previously envisioned by the Bank, “boosting inflation prospects”. Meanwhile, Ben Broadbent, the BoE’s deputy governor for monetary policy, voiced concern over future unemployment rates as the job retention scheme is unwound.