Bank of England launches £150bn QE programme on first day of lockdown
The Bank of England’s Monetary Policy Committee (MPC) has extended its quantitative easing programme by £150bn to help shore up the economy as the second English lockdown begins and Brexit looms.
It also voted unanimously to maintain interest rates at 0.1%, despite speculation of a cut.
The extension of QE will take the total stock of government bond purchases to £875bn.
The Bank is tasked with setting monetary policy to meet a 2% inflation target, and in a way that helps to sustain growth and employment.
“The outlook for the economy remains unusually uncertain,” the MPC said in a statement.
“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.
“It also depends on the responses of households, businesses and financial markets to these developments.”
The Bank expects a decline in GDP in the final quarter of 2020, worsening its forecast from August. While it is then predicting household spending and GDP to pick up in the first three months of next year, it said the level of activity “is expected to remain materially lower than in 2019 Q4” – the last quarter unaffected by Covid-19.
It also said trade and GDP are “likely to be affected during an initial period of adjustment, over the first half of next year”, as Brexit happens.
Chancellor Rishi Sunak, writing in response to the formal letter from the Bank of England Governor Andrew Bailey to approve the QE extension, said: “We recognise the extreme disruption Covid-19 is causing for people’s lives, their businesses, their jobs and the nation’s economy, and further action now to protect the economy will ensure we are in the best possible place to recover once the health situation improves.”
