The central bank revealed its latest forecast holding interest rates at 0.1% after the unanimous vote of its nine-member Monetary Policy Committee (MPC).
It improved its “indicative projection” of the economy’s growth, forecasting that GDP will decline by 9.5% this year, following an unprecedented government intervention to protect businesses and jobs in the world. ‘impact of COVID-19[feminine[feminine crisis.
While this is the worst performance in 99 years, it is less severe than the 14% drop in the Bank’s May scenario, which would have been the worst in more than three centuries.
However, he also warned that he does not expect the economy to return tocoronavirus levels until “end of 2021”.
He previously predicted that GDP could return to its pre-pandemic size by the second quarter of 2021.
The Bank also released a revised unemployment forecast which is expected to peak at 7.5% by the end of this year, almost double the most recent rate but lower than its previous estimate of just under 10%.
In addition to holding interest rates, the Bank has also said it will keep its current quantitative easing program at £ 745 billion.
Rates have already been cut twice, by 0.75%, since mid-March as part of the Bank’s measures to try to support the economy.
The bank also said its review of whether to push rates into negative territory was underway and that certain factors could change its earlier view that the floor should be just above zero.
However, he warned that such a decision could hurt his balance sheets and that there were “other instruments available”.
“The MPC will continue to assess the appropriate stance of monetary policy and keep the appropriate tools under review to accomplish its mission – including negative policy rates,” the Bank said.
:: Listen to the daily podcast on Apple Podcasts, Google Podcasts, Spotify, Spreaker
The pound’s value rallied against the dollar after traders welcomed the decision to hold rates.
Fiona Cincotta, analyst at Gain Capital, said: “The Bank of England was much more optimistic than expected about the recovery.
“The revised upward growth forecast, a faster recovery than initially feared and no tilt towards negative rates yet have pushed the pound up towards $ 1.32. “