The Bank of England (BoE) has expanded its virus crisis support for the economy by £150bn, while warning of a deeper hit from the return to tightened COVID-19 restrictions.
The latest meeting of its Monetary Policy Committee (MPC) kept interest rates at their record low of 0.1% - defying speculation among some commentators that it could opt for negative rates for the first time in its history to encourage more lending by banks and spending.
As England entered its second lockdown of the year, the Bank said its decision to unleash more quantitative easing (QE) now would help oil the wheels as large parts of the economy grind to another enforced halt.
The decision also reflected, the bank said, an "initial period of adjustment" to be expected following the conclusion of the Brexit transition period, saying its influence was based on the assumption of a trade deal being agreed by the year's end.
It announced the additional aid hours before the chancellor was due to update MPs on the support available to businesses and their staff from the government, including an expansion of the furlough scheme.
The size of the BoE's QE, or asset purchase programme, now stands at £875bn.
It allows the bank to release cash into the economy to support everyday activities.
The Bank, in its update on Wednesday, said the extra £150bn of aid reflected its downgraded forecasts that the economy would now remain below its pre-pandemic peak through the first quarter of 2022.
It had previously expected the recovery to have been completed next year.
However, it stopped short of forecasting a so-called double-dip recession as it expected that output, following a lockdown hit in the current quarter, would be positive to the tune of 2.4% during the first three months of 2021 despite an expected 1% hit from expected Brexit trade complications.
It believed that gross domestic product (GDP) would fall by 11% in 2020 as a whole.
Before the resurgence in coronavirus disruption, it had forecast a 9.5% hit.
The Bank also upwardly revised its projections for the virus crisis hit to employment.
It said the marginal increase to a jobless rate peak of 7.75% this year from 7.5% reflected the government's decision to extend the furlough scheme.
Minutes of the MPC's meeting read: "GDP is projected to recover further as the direct impact of Covid on the economy is assumed to wane.
"Activity is also supported by the substantial fiscal policies already announced and accommodative monetary policy.
"The recovery takes time, however, and the risks around the GDP projection are judged to be skewed to the downside."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the bank's QE action implied it could spin the wheel again early next year.
He explained: "The MPC's decision to increase its holdings of gilts by £150bn over the course of 2021 implies that weekly purchases will be 25% lower on average next year than at present, though the committee has pledged to maintain the current pace of its purchases initially."
https://news.google.com/__i/rss/rd/articles/CBMibmh0dHBzOi8vbmV3cy5za3kuY29tL3N0b3J5L2Nvcm9uYXZpcnVzLWJhbmstb2YtZW5nbGFuZC11bmxlYXNoZXMtZnVydGhlci0xNTBibi1vZi1zdXBwb3J0LWZvci1lY29ub215LTEyMTI0MDk20gFyaHR0cHM6Ly9uZXdzLnNreS5jb20vc3RvcnkvYW1wL2Nvcm9uYXZpcnVzLWJhbmstb2YtZW5nbGFuZC11bmxlYXNoZXMtZnVydGhlci0xNTBibi1vZi1zdXBwb3J0LWZvci1lY29ub215LTEyMTI0MDk2?oc=5
2020-11-05 07:37:53Z
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