The Bank Of England has injected £150 billion into the UK economy to fight the economic effect of the pandemic and has said it will do ‘everything we can’ to support the economy.
Governor Andrew Bailey said: “We are here to do everything we can to support the people of this country – and we’ll do it and will do it quickly.”
Slower and bumpier
The Bank has warned that the resurgence of the coronavirus forcing a new lockdown will lead to a slower and bumpier recovery.
It believes Britain will escape another recession, but expects unemployment to rise sharply as government support schemes eventually wind down.
The £150 billion of quantitative easing was announced as the Bank’s Monetary Policy Committee agreed to keep base rate at its record low level of just 0.1% for another month.
A spokesman said it expects the economy to shrink by 2% in the last quarter of this year, making it 11% since the start of the pandemic, before bouncing back at the start of 2021, providing lockdown restrictions are lifted. However, it doesn’t expect the economy to return to pre-virus size until 2022.
Unemployment is expected to hit 7.75% in the middle of next year – the highest level since 2013.
Quantitative easing is a process used by the government to boost the economy in difficult financial times by injecting more cash.
No actual cash is printed, despite it often being described as ‘printing money’. The Bank creates the new money electronically and it is then spent on buying government bonds – a type of investment where money is lent to the government on the promise you will be repaid a certain sum of money in the future and interest in the meantime.
It is a process meant to stimulate the economy and was first used in 2009 at the height of the financial crisis with an injection of £200 billion.
In 2016 it rose to £445 billion at the time of the Brexit referendum result.
But since the start of the pandemic it has shot up to £895 billion overall.
The new injection represents a steeper downturn and slower recovery than was predicted in August.
The Bank said its new policy reflected ‘heightened health concerns and uncertainty about the outlook’.