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The Bank of England holds interest rates, but warns of ‘unusually uncertain’ prospects



Mounted police officers sit outside the Royal Exchange and Bank of England in London on 17 June 2020.

TOLGA AKMEN | AFP via Getty Images

LONDON – The Bank of England on Thursday left interest rates unchanged and maintained its current level of asset purchases, but warned that the outlook for the economy remains “unusually uncertain.”

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All members of the Monetary Policy Committee (MPC) voted to keep the primary lending rate at 0.1%, with the central bank lowering interest rates twice from 0.75% since the start of the pandemic. MPC also voted unanimously to maintain the target for the total holding of its £ 745bn bond purchases. ($ 960.8 billion).

Sterling traded about 0.5% lower against the dollar shortly after the announcement.

Britain faces simultaneous risks of a no-deal Brexit, an increase in coronavirus cases leading to the reintroduction of some social restrictions and the termination of the government’s furlough scheme next month, which had supported millions of sleeping workers during the pandemic .

After throwing a record 20.4% in the second quarter to officially go into recession, the UK economy saw signs of recovery with a 6.6% monthly expansion in July after nationwide lockdown measures were gradually lifted.

However, an increase in cases to more than 3,000 per. Today forced the government to implement new rules on social gatherings and implement localized lockdowns in certain regions, questioning the country’s recovery.

“The recent increases in Covid-19 cases in some parts of the world, including the UK, have the potential to offset economic activity, albeit probably on a smaller scale than seen earlier in the year,” the bank said in its Summary.

It added that there is still a risk of a “more persistent period of rising unemployment than in the central projection.”

Despite stronger-than-expected domestic economic data in recent months, the central bank said the economic outlook remains “unusually uncertain” as its key assumptions include a free trade agreement with the European Union, which enters into force on 1 January and a gradual spread of the effect of Covid-19.

The MPC also said it does not intend to tighten monetary policy until there is “clear evidence that significant progress is being made in eliminating spare capacity and reaching the 2% inflation target sustainably.”


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