The Bank added that the job market recovery would take longer, with unemployment in the UK expected to “materially” climb to 7.5% by the end of the year as the retention program of employment ends.
In its first official forecast since the outbreak of the pandemic, the Bank said the recovery had been “earlier and faster” than it had assumed in May, reflecting an earlier-than-expected easing of lockdown restrictions. .
He said spending on clothing and household furnishings was now back to pre-Covid levels, while consumers continued to spend more on food and energy than before the lockdown.
However, he said leisure spending and business investment remained subdued, which would weigh on the recovery.
Its nine-member Monetary Policy Committee (MPC) also voted unanimously to keep rates at 0.1%.
The MPC said its central projection projected that GDP will continue to recover in the near term, but is not expected to exceed its end-2019 levels until at least the end of 2021.
Rates have already been cut twice, by 0.75%, since mid-March as part of the Bank’s measures to try to keep the economy afloat.
“The MPC will continue to examine the desirability of a negative policy rate as a policy tool alongside its larger toolbox,” the Bank of England said.
“The MPC has other instruments available – for example, asset purchases and forward guidance. The MPC will continue to assess the appropriate stance of monetary policy and will keep the appropriate tools to achieve its mission – including negative policy rates – under review. “