Rising coronavirus rates threaten economy, Bank of England says
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The Bank of England has kept interest rates at 0.1%, citing a lack of clarity over the UK's future trade relationship with the EU and the path of the coronavirus pandemic as cause for concern.The economy has recovered much of the lost output since lockdown.The Bank will continue its monetary support for the economy,. But it stopped short of increasing its bond-buying programme or reducing interest rates further.
The Monetary Policy Committee , which sets interest rate policy, said previous projections of economic recovery were"on the assumption of an immediate, orderly move to a comprehensive free trade agreement with the European Union on 1 January 2021". Economic recovery would also depend on the evolution of the pandemic and measures taken to protect public health, the MPC said.Defending new social distancing measures on Wednesday, the Prime Minister said he was trying to avoid a second national lockdown which could have"disastrous" financial consequences for the UK.The Bank of England said despite a stronger than expected recovery in the last few months, the economy was still about 7% smaller than at the end of last year.
Usually if the economy is not growing strongly enough, the Bank of England considers lowering interest rates to encourage firms to invest and savers to spend.Minutes from this month's meeting show that the MPC discussed the use of negative interest rates to stimulate the economy. Last month, the Bank's governor, Andrew Bailey, appeared to rule that out, though he said negative interest rates remained in the"tool box".
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