Britain’s coronavirus recession was not as deep as Andrew Bailey, the Governor, feared in April, and officials have found signs of a recovery taking hold.
But they still fear sweeping job losses when the Government-backed furlough scheme comes to an end, and so ramped up QE to add an extra £100bn on top of the £200bn of bond buying launched in March.
“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,” said the minutes of the Monetary Policy Committee’s meeting.
三级成人视频“There was a risk that the path of unemployment would be higher than expected at the time of the May Report, particularly if it proved difficult for furloughed workers to be re-absorbed into employment.”
三级成人视频Payments data indicates consumer spending is coming back more quickly than anticipated, particularly as families get out to spend on DIY products, cars, clothing and household goods.
三级成人视频But this might not cover all spending - families are expected to remain cautious even after the lockdown fully lifts, dampening the scale of the recovery and putting jobs at risk.
The Bank has been investigating the possibility of taking interest rates negative, but has stuck with its current record low of 0.1pc for now.
The extra QE should help keep a lid on interest rates in financial markets, as well as helping to absorb more of the extra debt issued by the Government as it runs a deficit of potentially more than £300bn this year.
“Today’s decision sends a clear signal to the market: the Bank of England stands ready to absorb the upcoming gilt issuance, and in doing so will keep government borrowing costs low,” said Hugh Gimber at JP Morgan Asset Management.
Economists expect more QE to come later in the year.
三级成人视频“We doubt that this is the last QE extension. Unemployment looks set to rise sharply in the second half of this year and to fall back slowly thereafter,” said Samuel Tombs at Pantheon Macroeconomics.
“The resulting prolonged weakness in domestically generated inflation likely will necessitate the MPC doing more to stimulate the economy in the winter. We look for a further QE extension of £50bn in November, but for the Committee to hold back from cutting Bank Rate below zero, due to the questionable benefits of such a step.”
三级成人视频Andy Haldane, the Bank’s chief economist, is more upbeat than the rest of the committee and so voted against the extra QE - though he was the sole dissenter on the nine-strong MPC.
三级成人视频His view was that “the recovery in demand and output was occurring sooner and materially faster than had been expected at the time of the previous MPC meeting". "If this persisted, cumulative output losses over the policy horizon could plausibly have halved compared with what had been expected at the time of the May Report, boosting inflation prospects in the medium term,” his notes added.