LONDON – The Bank of England warned Thursday that the scale and duration of the economic shock stemming from the coronavirus pandemic will be “large and sharp but should ultimately prove temporary.”
The rate-setting Monetary Policy Committee said in a statement that the depth of the downturn will largely depend on whether job losses and business failures can be "minimized."
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Early surveys of the economy in Britain are pointing to a virus-related recession even deeper than the one that followed the global financial crisis a decade ago. Many economists think that the economy could shrink by more than 10% just in the first half of this year, an almost unprecedented decline in developed economies.
Like other central banks around the world since the pandemic spread viciously over the past few weeks, the Bank of England, has slashed interest rates, reducing its main one to 0.1%, its lowest level ever. It has also expanded its bond-buying program by 200 billion pounds ($240 billion) and is offering hundreds of billions more in cheap loans to businesses.
No further measures were announced Thursday but the rate-setting panel said it stands ready to provide more support to ensure that liquidity remains sufficient and that borrowing rates don't go too high
“The MPC will continue to monitor the situation closely and, consistent with its remit, stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy,” it said.
Governor Andrew Bailey, who has only been in his job since the start of last week, has previously said nothing can be taken off the table in terms of what the bank can do.
Since its last regular meeting at the end of January, the rate-setting panel has held two emergency meetings to enact changes in policy. That suggests it could still take further action if deemed necessary before the next scheduled meeting on May 7, especially if the economic situation worsens.
Though it is independent, the Bank of England has in recent weeks coordinated its action with the British government, which has itself ramped up spending and launched an income guarantee scheme for workers if their companies retain them rather than lay them off. A further scheme for Britain's roughly 5 million self-employed workers is expected to be announced later by Treasury chief Rishi Sunak.