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Bank of England ramps up stimulus by £150 bn to tackle new lockdown impact

The move comes on the day that England entered a four-week lock­down to curb a second wave of Covid-19, which is now killing as many Britons each day as it did in May

Bank of England | Coronavirus

William Schomberg David Milliken & Andy Bruce | Reuters  |  London 

Bank of England
A statue is silhouetted against the Bank of England in the City of London, Britain | Photo: Reuters

The increased its already huge bond-buying stimulus by a bigger-than-expected £150 billion ($195 billion) as it prepared for economic damage from new lockdowns and the looming risk of Brexit.

The move comes on the day that England entered a four-week lock­down to curb a second wave of Covid-19, which is now killing as many Britons each day as it did in May.

The BoE said Britain's was set to shrink 2 per cent during the fourth quarter as a result, and that the would shrink a record 11 per cent over the course of 2020 overall, more than the 9.5 per cent it had forecast in March. "The outlook for the remains unusually uncertain," the BoE said.

"It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom." The BoE kept its benchmark Bank Rate at 0.1 per cent, as expected in the poll, and made little mention of negative rates while a consultation with banks over the practicalities is underway.

The BoE raised the size of its asset-purchase programme to £895 billion, £50 billion more than expected by most economists in a Reuters poll. The central bank said that would give it enough firepower to stretch its buying of government bonds through to the end of 2021.

"An extraordinary economic shock warrants an extraordinary policy response," said Ambrose Crofton, global market strategist at J P Morgan Asset Management.

"The resurgence of the virus in recent months will mean both the govern­ment and companies are once again turning to global capital markets to borrow large sums.

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First Published: Fri, November 06 2020. 01:05 IST