BANK OF ENGLAND PUMPS IN 150B POUNDS AS ECONOMIC STIMULUS
The Bank of England (BoE) increased its already huge bond-buying stimulus by a bigger-than-expected 150 billion pounds ($195 billion) as it sought to cushion Britain’s struggling economy against the hit from a second coronavirus lockdown, William Schomberg and David Milliken reported for Reuters.
BoE, also wary of the risk of a Brexit shock in less than two months’ time, raised the size of its asset purchase program to 895 billion pounds ($1.16 trillion), 50 billion pounds more than expected by most economists in a Reuters poll.
The central bank kept its benchmark Bank Rate at 0.1%, as expected in the poll, while it looks into the feasibility of taking borrowing costs below zero for the first time. BoE said the economy would not reach its pre-pandemic size until the first quarter of 2022, pushing back its forecast of how quickly output would return to its Q4 2019 level.
BoE cut its forecasts for Britain’s economy which it now expects to only exceed its size before the COVID-19 pandemic in the first quarter of 2022. Previously, the BoE had expected the recovery be complete by the end of next year. It said it expected Britain’s economy would shrink by 11% in 2020, more severe than the 9.5% contraction it forecast in August. Gross domestic product (GDP) was likely to grow by 7.25% in 2021, weaker than a previous forecast of a 9% bounce-back.