The Bank of England has increased its monetary stimulus by a bigger than anticipated ￡150 billion (US$195 billion) as it tries to boost the economy amid new lockdown measures.
In a statement released yesterday, the central bank’s Monetary Policy Committee said that its challenge is to respond to the economic and financial impact of the resurgence of COVID-19, which has led to the reimposition of widespread restrictions across the UK.
A four-week lockdown began yesterday in England that will keep closed all shops selling items deemed to be non-essential, such as books and clothes, as the government seeks to contain a sharp increase in infections.
Photo: EPA-EFE
The other nations of the UK — Scotland, Wales and Northern Ireland — have also announced wide-ranging restrictions on economic activity.
The latest restrictions will batter an economy that had been just recovering from the sharp recession caused by a spring lockdown.
As a result, the Bank of England was widely expected to respond to the changed economic backdrop.
However, the increase in the bond-buying program is bigger than the ￡100 billion anticipated in financial markets.
The stimulus is aimed at keeping a lid on borrowing rates across the economy to boost lending as well as ensuring that money keeps flowing through the financial system.
The committee also kept its main interest rate unchanged at the record low of 0.1 percent.
The bank said that Britain’s economy would shrink by 11 percent this year, more severe than the 9.5 percent contraction it forecast in August.
GDP is likely to grow by 7.25 percent next year, weaker than a previous forecast of a 9 percent bounce-back, it said.
Britain’s economy, which as well as COVID-19 is facing the risk of a trade shock when its post-Brexit transition with the EU expires on Dec. 31, has been supported by a surge in debt-fueled spending by the government.
Despite the spending, Britain faces the sharpest peak-to-trough contraction of any G20 economy, Moody’s said on Oct. 16 when it cut Britain’s credit rating.
Additional reporting by Reuters
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