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Bank of England cuts outlook on Covid, holds rate
LONDON, Feb 4, 2021 (BSS/AFP) – The Bank of England left its key interest rate and stimulus unchanged Thursday, but slashed its 2021 growth forecast despite vaccines rollouts.
BoE policymakers voted to keep its main borrowing cost at a record-low 0.1 percent following their first rates meeting since Britain’s divorce from the European Union at the start of January,
The central bank also cut its 2021 growth forecast to 5.0 percent from 7.25 percent.
It said Covid-19 vaccination programmes around the world “has improved the economic outlook”.
“Nevertheless, recent UK and global activity has been affected by an increase in Covid cases, including from newly identified strains of the virus, and the associated reimposition of restrictions,” the BoE added in a statement.
It meanwhile signalled that Britain would likely avoid a so-called double-dip recession with marginal growth expected in the final three months of last year.
And again it hinted at the possibility of negative interest rates, saying it was “appropriate” to start preparations for adding such action to its monetary policy toolkit.
A negative interest rate would likely see retail banks further cutting their own borrowing costs, adding more pain to savers while boosting borrowers.
The BoE on Thursday added that the economy was about 8.0 percent smaller in the fourth quarter than prior to the start of the pandemic in early 2020.
It expects gross domestic product to shrink by about four percent in the first quarter of this year, reversing a forecast for growth.
Over the past year, the BoE and UK government have pumped billions of pounds into the British economy to boost lending, stimulate growth and protect jobs amid the deadly pandemic.
The central bank on Thursday said it had maintained its quantitative easing stimulus programme at £895 billion ($1.2 trillion, 1.0 trillion euros).
The bank last altered the vast QE stimulus by £150 billion in November.
BSS/AFP/TIT/1953 HRS