Picture used for illustrative purpose only.
The Bank of England (BoE) held off from further stimulus measures on Thursday but said it was ready to take more action to counter the country’s biggest economic slump in over 300 years, caused by the coronavirus lockdown.
In what it called an ‘illustrative scenario’, the BoE said it saw a plunge of 14% in Britain’s economy in 2020 followed by 15% bounce-back in 2021.
Such a scenario would require very significant monetary and fiscal stimulus, it said.
The BoE kept its benchmark interest rate at an all-time low of 0.1% and left its target for bond-buying, most of it British government debt, at 645 billion pounds ($797 billion).
Two of its nine policymakers - Michael Saunders and Jonathan Haskel - voted to increase its bond-buying firepower by 100 billion pounds.
“However the economic outlook evolves, the Bank will act as necessary to deliver the monetary and financial stability that are essential for long-term prosperity and meet the needs of the people of this country,” Governor Andrew Bailey said.
“This is our total and unwavering commitment.”
He said the BoE expected “the recovery of the economy to happen over time, though much more rapidly than the pull-back from the global financial crisis.”
The illustrative scenario was based on the government gradually lifting its coronavirus lockdown, that has shuttered swathes of the economy, between June and September.
Both decisions announced on Thursday were in line the forecasts of most economists in a Reuters poll.
Many economists expect the BoE to increase its asset purchase programme in June, before the extra 200 billion pounds it gave itself in March is exhausted by the furious pace of its buying of British government debt.
The government has already rushed out spending and tax measures worth about 100 billion pounds to try to counter the effect of its coronavirus lockdown.
The BoE said it expected a 25% plunge in British gross domestic product in the April-June period with the unemployment rate more than doubling to 9%. Inflation was likely to fall below 1% in the next few months, half the BoE’s target.
However, the BoE also said the recent economic data suggested demand had stabilised, albeit at very low levels.
Sterling rose after the central bank’s announcement, initially gaining as much as half a cent against the US dollar. British government bonds prices were little changed.
Last week, the US Federal Reserve restated a pledge to keep interest rates low and continue offering trillions of dollars in credit as long as the economy needs it, and the European Central Bank kept the door open to further stimulus.
Minutes of this week’s discussions at the BoE showed policymakers thought there were risks that the illustrative scenario could prove too optimistic because people might remain cautious about resuming their normal lives after the lockdown.
Workers might be worried about their jobs and companies might also be more risk averse.
“The financial system was, however, in a much better position to support households and businesses through this period compared with the global financial crisis,” the minutes said.
A separate BoE report published on Thursday said an emergency “desk top” stress test showed that top banks and building societies could keep lending.
Meanwhile, Britain’s job market came to a dead stop in April as the coronavirus lockdown prompted a huge drop in economic activity, from which businesses will take time to recover, surveys showed on Thursday.
Demand for labour contracted at the fastest pace in the 22-year history of the monthly Report on Jobs published by the Recruitment and Employment Confederation trade body and accountants KPMG.
The figures chimed with other signs that Britain is in the midst of a historic collapse in economic output after measures to slow the spread of the coronavirus forced company closures across the country last month.
A recent Reuters poll of economists suggested the economy is on course to contract by around 13% in quarterly terms in the three months to June.
“The COVID-19 pandemic continues to wreak havoc on the UK jobs market with a record drop in vacancies and recruitment plans frozen,” said James Stewart, vice chair at KPMG.
Separate reports from industry groups Make UK and the Institute of Directors (IoD) report suggested it may be a long road to recovery.
More than half of the companies surveyed by the IoD this month said it would take them more than a month to return to pre-lockdown levels of activity, even if restrictions were lifted entirely.
Australia’s coveted ‘AAA’ credit rating came under threat on Wednesday as the country’s parliament discussed an emergency A$130 billion ($80 billion) stimulus package bill to help cushion the economic blow from the coronavirus pandemic.
The Bank of England left its key interest rate and stimulus unchanged on Thursday, but slashed its 2021 growth forecast despite vaccines rollouts.
The Bank of England (BoE) called on lenders on Friday to provide enough credit to companies to see them through the coronavirus crisis as the government closes its emergency lending guarantee schemes.
From 6 am, buyers and investors of various nationalities competed at the Nakheel Properties sales center, located at the entrance to Palm Jumeirah, to win opportunities to own a luxury villa or a plot of empty land within the newest waterfront urban development areas in Dubai.
The GCC food market is expected to cross $1 billion by the end of 2023 with a growth rate of 6 per cent. The total value of global food market is set to reach $7 trillion by the end of the current year, this was revealed during the first day of Future Food Forum 2023 in Dubai on Wednesday.
Dubai International Financial Centre (DIFC), in collaboration with Refinitiv, a London Stock Exchange Group business and one of the world’s largest providers of financial markets data and infrastructure, on Wednesday published a report titled “Drivers of Innovation in Financial Services”, revealing a five-year
Global debt hit a record $307 trillion in the second quarter of the year despite rising interest rates curbing bank credit, with markets such as the United States and Japan driving the rise, the Institute of International Finance (IIF) said on Tuesday. The financial services trade group said in a report that global debt in