Bank of England announces £100bn boost to UK economy
The Bank of England has announced that it will inject an extra £100 billion into the UK economy whilst maintaining interest rates at a record low of 0.1%.
The bank hopes the financial injection will help to fight the coronavirus-induced downturn.
Policymakers at the bank also voted 8-1 to increase the size of its bond-buying programme.
Last month, the bank warned that the coronavirus pandemic will force the UK economy towards its deepest recession on record. It said that the economy was on course to shrink 14% this year.
However, the bank has now said there was growing evidence that the hit to the economy would be “less severe” than initially feared.
The Bank’s Monetary Policy Committee (MPC) also kept interest rates at a record low of 0.1%.
The move comes just days after Andrew Bailey, the bank’s governor, said policymakers were ready to take action after the economy suffered its biggest monthly contraction on record.
The UK economy shrank by 20.4% April, while official jobs data showed the number of workers on UK payrolls decreased by over 600,000 between March and May.
Howard Archer, chief economic advisor to the EY ITEM Club, said: “As largely expected, the Bank of England provided further stimulus to the economy through announcing a further £100 billion of asset purchases, which will take the total stock up to £745bn. The £100bn of asset purchases announced was in line with the consensus anticipated increase.
“The minutes of the June MPC meeting concluded that at this meeting, a majority of MPC members judged that a further easing of monetary policy was warranted to support the economy and thereby to meet the inflation target in the medium term. While recent demand and output data had not been quite as negative as expected, other indicators suggested greater risks around the potential for longer-lasting damage to the economy from the pandemic.”
He added: “It is likely that the Bank of England will fully spell out its thinking on negative interest rates on 6 August. This is when it will release the next quarterly edition of its Monetary Policy Report alongside the minutes of its MPC meeting as well as announcing its next set of decisions on monetary policy.”