The Bank of England boosted its bond-buying program by a bigger-than-expected 150 billion pounds ($195 billion) in another round of stimulus to help the economy through a second wave of coronavirus restrictions.
Officials led by Governor Andrew Bailey voted unanimously to increase their government bond-purchase target to 875 billion pounds and keep the benchmark interest rate at 0.1%.
The extra bond buying, compared with 100 billion pounds predicted by economists, will start in January and finish by the end of 2021, the BOE said. Officials are ready to step up the pace of purchases if market functioning worsens, they said.
The BOE has now eased monetary policy four times since March, flooding the economy with money to keep borrowing costs down and help the government afford the massive cost of fighting the pandemic.
Officials also slashed their estimates for economic growth, saying they now expected a contraction in the fourth quarter. Risks to the recovery are skewed to the downside, they said.
The monetary action comes the same day that England enters a new four-week partial lockdown to help contain a surge in virus infections. Chancellor of the Exchequer Rishi Sunak will address Parliament on the government’s support for businesses and households later on Thursday.
The bond-buying program, which is now more than double its pre-crisis size, has been the BOE’s favored measure. By soaking up the government’s increased debt issuance, it keeps markets stable and borrowing costs low.
The stimulus will also act as a cushion for any disruptions caused by the U.K.’s departure from the European Union’s single market at the end of the year.
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