The Bank Of England Is Pumping Another £150bn Into The UK’s Battered Economy As The Second Lockdown Begins
The Bank of England has agreed to pump another £150bn of quantative easing into the UK economy (PA)
The Bank of England has announced it will pump another £150billion into the UK economy in the form of quantitative easing, as fears of a double dip recession mount.
Expanding the programme to £895billion of total support since the pandemic begun, the Bank said output will fall in the final three months of 2020 as a result of the second lockdown, which began today.
Its quarterly monetary policy report shows the economy will fall to 11% below pre-Covid levels as all non-essential shops must close, as well as pubs, restaurants, leisure and entertainment venues will shutter until December 2.
Ahead of a statement in Parliament today by Rishi Sunak, where the Chancellor is expected to outline further government support for workers and businesses to get them through the latest restrictions, members of its Monetary Policy Committee voted unanimously to hold interest rates at the historic low of 0.1%.
The Bank forecast the economy will shrink by 2% between October and December, but said GDP will then pick up in the first quarter of 2021 to 2.4%.
However it warned the end of the Brexit transition period will cause enough trade disruption to knock off around 1% from GDP between January and March as many firms are still under-prepared.
With the economic recovery to pre-Covid levels taking longer than originally expected, the UK’s central bank forecasts unemployment will peak at 7.75%.
After the decision a statement from the Bank said: "GDP is projected to recover further as the direct impact of Covid on the economy is assumed to wane.
"Activity is also supported by the substantial fiscal policies already announced and accommodative monetary policy.
"The recovery takes time, however, and the risks around the GDP projection are judged to be skewed to the downside.”
In response Anneliese Dodds, Labour’s shadow Chancellor, said: “The Bank of England’s new forecast shows the huge economic costs of the Government’s last-minute scramble to catch up with events.
“Labour called three weeks ago for a short, effective circuit breaker. Instead we got weeks of delay that will be counted in lost lives and livelihoods.
“The Bank of England has had to step in once again because of the Government’s inability to get a grip on the health and economic crisis.”
Mr Sunak is expected to outline to MPs an extension of the furlough scheme for areas that remain in Tier 3 restrictions once the four-week lockdown ends.
There has been anger in the North of England that the Treasury had not signed off on this support before the South had been put under tougher restrictions.
But Justice Secretary Robert Buckland denied this was the case, telling BBC Radio 4's Today programme: "We were making important interventions and targeted support for those areas that were going into Tier 2 and Tier 3 throughout the last few months and I think it is unfair to say that there has been some kind of favouritism here.
"We are taking a uniform all-England approach to this and throughout the crisis it has been a UK approach indeed with regard to a lot of the financial interventions we have made to support the economy."
Pressed on whether he would bow to Theresa May's request for the economic impact of lockdown to be published, Mr Buckland said: "I think that everyone can see with their own eyes the particular impact, and when you see the amount of money the Chancellor has allocated for this crisis, that will tell you readily the sort of economic impact we are having to deal with."
PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe