The MPC voted to increase the target stock of purchased UK govt bonds to be financed by the issuance of BoE reserves
by AFP / pic by BLOOMBERG
LONDRES • The Bank of England (BoE) yesterday unveiled an extra £150 billion (RM810 billion) in cash stimulus as it forecast a deeper coronavirus-induced recession for the UK and England began a second lockdown.
The BoE, which held its benchmark interest rate at a record-low 0.1%, lifted its quantitative-easing (QE) stimulus by the equivalent of US$195 billion (RM809.25 billion) as it seeks to boost lending by retail banks and consequently economic growth.
The bank’s Monetary Policy Committee (MPC) voted “for the BoE to increase the target stock of purchased UK government bonds by an additional £150 billion, financed by the issuance of central bank reserves”, it said in a statement.
The statement made no reference to the possibility of negative interest rates, as some had speculated could be used as an additional stimulus tool.
The news came ahead of a statement from British Finance Minister Rishi Sunak who is reportedly set to announce another multibillion-pound Covid-19 support package, including another extension of his government’s furlough jobs scheme.
Yesterday’s BoE announcement, meanwhile, took the central bank’s total QE stimulus amount to £895 billion.
The bank has now pumped out £450 billion under its QE programme since March, when Covid19 prompted Britain’s first coronavirus lockdown.
Prior to this, it had pumped hundreds of billions of pounds into the UK economy over the past decade in the wake of the global financial crisis and Brexit.
England began yesterday a minimum four weeks of stay-at-home restrictions, as the government seeks to stem a second wave of Covid-19 after similar action elsewhere in Europe.
The initial lockdown that lasted around three months until midJune sparked Britain’s deepest recession on record.
“Since the committee’s previous meeting (in September), there has been a rapid rise in rates of Covid infection,” the BoE said in a statement announcing the outcome of Wednesday’s regular policy meeting.
“The outlook for the economy remains unusually uncertain,” it said. “It depends on the evolution of
the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the UK” post Brexit.
“It also depends on the responses of households, businesses and financial markets to these developments,” the BoE added.
It forecast the economy would shrink by 11% this year, worse than prior guidance of a 9.5% contraction.
GDP was then set to rebound by 7.25% next year — but this was also down from the 9% increase given previously.
Under QE, the BoE purchases assets such as government and corporate bonds, with the aim of boosting investment and lending to stimulate economic activity.
BoE governor Andrew Bailey (picture), speaking to reporters on a conference call, described yesterday’s action as a response to an “extraordinary” global health emergency.
“We’re not experts on what the measures should be on health, on national lockdown. We talk to experts,” Bailey said.
“What I would say, and I look at it from the point of view of economic policy, I think it’s very important that we take prompt, strong action.
“We are all aware that this is an extraordinary situation, I think it is therefore appropriate that we take this action,” he added. — AFP