The central bank has observed a substantial decline in economic activity across the country, which can be attributed to the global health emergency and the subsequent lockdown measures implemented to curb its spread.
For the entire year of 2020, the Bank anticipates a staggering 14% reduction in GDP.
The monetary policy committee (MPC) at Threadneedle Street voted unanimously to maintain interest rates at a historic low of 0.1%, marking the lowest level in the bank’s 325-year history. However, the rate-setting panel exhibited a divide concerning the Bank’s £645 billion quantitative easing stimulus package, with two members advocating for an immediate £100 billion increase.
In its first monetary policy report released since the pandemic’s onset, the central bank noted a 30% drop in consumer spending based on payments data from debit and credit cards. Furthermore, housing market activity had virtually come to a halt. While acknowledging the considerable uncertainty surrounding the nation’s growth prospects as it prepares to ease lockdown measures, the Bank outlined a “plausible illustrative economic scenario,” which envisions a 25% GDP plunge in the second quarter and a doubling of the unemployment rate to approximately 9%.
Nevertheless, the Bank expressed optimism that the sharp decline in economic activity would be temporary, with a relatively rapid recovery expected as social distancing measures are eased.