BoE warns UK economy will not exceed pre-Covid-19 levels until end of 2021

The Bank of England has tempered its previous prediction that the UK economy would rebound swiftly from the recession caused by the coronavirus crisis, saying on Thursday that GDP would not exceed pre-pandemic levels until the end of 2021.

The monetary policy committee left interest rates on hold at 0.1 per cent with its target for the total stock of its asset purchases also unchanged at £745bn.

It said the initial hit from lockdown measures had not been quite as severe as it had projected in May, although it still expected output to be more than 20 per cent lower in the second quarter of 2020 than it had been in the final quarter of 2019.

The MPC was also more optimistic about the outlook for unemployment than it had been in May, predicting the jobless rate would peak at around 7.5 per cent at the end of this year before declining gradually.

Consumer price inflation was expected to fall further below target, averaging around 0.25 per cent in the latter part of the year, and to be around the MPC’s 2 per cent target in two years.

But — while cautioning that medium-term forecasts were unusually uncertain — the BoE said output would not exceed the level reached at the end of 2019 before the end of 2021.

Sterling rose following the Bank of England’s interest rate decision and economic forecasts, and was recently 0.4 per cent higher at $1.3160. 

Source Article

Next Post

City Bulletin: Bank says economy won’t be back to pre-Covid levels until end of next year

The Bank of England was always likely to keep interest rates on hold on Thursday morning at their record low 0.1 per cent — and it did. So it’s the Bank’s projections on the future for the UK economy that will attract most of the attention. The Bank said that […]