Bank of England Raises Stimulus Amid Coronavirus & Brexit
The Bank of England has further increased its bond-buying stimulus by 150 billion pounds in preparation for economic damage from new lockdowns scheduled to begin today, as well as the looming risk of Brexit, as the transition period is coming to an end on the 31st of December. The bank had additionally increased the size of its asset-purchase programme to 895 billion pounds, exceeding analyst expectations by 50 billion pounds.
The central bank has also revised its forecasts for Britain's economic recovery, commenting that it now expects to exceed its size before the COVID-19 pandemic only in the first quarter of 2022, as opposed to previous expectations that recovery would be complete by the end of the year. The benchmark Bank Rate remained at 0.1%, and there was hardly any mention of negative rates.
Britain's economy is expected to shrink 2% during the fourth quarter of this year and take an 11% tumble in 2020, more severe than the initially-forecasted 9.5% fall. GDP, in turn, was likely to grow by 7.25% in 2021, weaker than the previous 9% expectation, and unemployment was set to peak 7.75% in Q2 of next year, as opposed to the expected 4.5%, the BoE said. The two-year inflation forecast remained unchanged at 2%, however.
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