- Bank of England maintains interest at 0.1%
- Pledges £100 billion in bond purchases
- Consumer spending improving
Britain's 326-year-old central bank today announced its monetary policy decision as the country faces possibly its worst recession since 1706. It kept interest rates at 0.1%, a record low, and voted by a majority of 8-1 to increase the government bond-buying by an additional £100 billion, taking the total stock of asset purchases to £745 billion. The program is expected to be completed around the turn of the year with the pace of purchases slowing, roughly by half, from current levels.
"There are signs of consumer spending and services output picking up, following the easing of Covid-related restrictions on economic activity," it said in the statement. "Recent additional announcements of easier monetary and fiscal policy will help to support the recovery. Downside risks to the global outlook remain, however, including from the spread of Covid-19 within emerging market economies and from a return to a higher rate of infection in advanced economies."
Yesterday the government also announced the inflation rate reached an annual 0.5% in May, the lowest in four years, down from 0.8% in April and 1.8% at the start of the year. It has a target of 2%. CPI is expected to fall further in coming quarters, largely reflecting the weakness of demand, said the central bank.
Life is slowly starting to return to normal in the U.K. as measures are lifted, but the data reveals the toll the lockdown took. The economy contracted 20.4% in April, following a 6% fall in March. This was the steepest decline in output since records began in 1997 and three times worse than during the global financial crisis. From the peak in February 2008 to the lowest point of March 2009, GDP contracted 6.9%.
Services output, which makes up 79.6% of the U.K. economy, contracted 19% in April. Accommodation and food services declined 88%. Job claims jumped to nearly 3 million in May from 1.24 million in March, and the number of payroll employees fell by 612,000 during the same period. Unemployment was at 3.9% in April but is expected to keep rising.
The country's badly battered hospitality sector is set to reopen on July 4. Brits in London may be able to toast American independence in large al fresco dining areas. Roads are to be closed and pavements widened so that restaurants and pubs can have more space for tables and chairs to allow social distancing, according to a proposal published by local government. Continental or European-style outdoor dining is growing in popularity in cities across the world as people look to return to their favorite establishments and socializing in the safest way possible.