Bank of England Keeps Rates   05/06 07:46

   

   LONDON (AP) -- The Bank of England will keep interest rates on hold and has 
grown more optimistic about the economic recovery in the U.K. this year as a 
result of the rapid rollout of coronavirus vaccines.

   In a prepared statement Thursday, the nine-member Monetary Policy Committee 
said it will maintain the bank's main interest rate at 0.1%. The unanimous and 
widely anticipated decision means that interest rates will remain at the lowest 
level in the bank's 327-year history.

   Alongside its decision, the bank's rate-setting panel said growth is likely 
to be greater than it previously thought in the coming quarters as consumers 
ramp up their spending following the easing of lockdown restrictions, largely 
due to the rapid rollout of coronavirus vaccines.

   The bank is now projecting U.K. economic growth of 7.25% in 2021, up from 
its previous forecast of 5%. Because it anticipates growth being brought 
forward, it has revised down its forecasts for next year. It is now expects 
5.75% growth in 2022, instead of the 7.25% previously predicted.

   The growth rates anticipated should mean that the British economy makes up 
much of the ground that it lost during the pandemic, which saw widespread 
restrictions on economic activity. In 2020, the British economy contracted by 
around 10%, one of the developed world's worst outcomes.

   Though the U.K. had Europe's highest virus-related death toll at more than 
127,500, its vaccine rollout has been successful compared with its European 
peers. By Wednesday, around 52% of the British population had received at least 
one dose of vaccine with around a quarter getting two.

   "A fast and effective vaccine rollout meant that many individuals might feel 
safe to return to pre-COVID spending behavior, supplemented by considerable 
pent-up demand from the earlier periods of restrictions," the committee said, 
according to minutes of their meeting.

   The U.K. is in the midst of lifting lockdown restrictions and there are 
hopes that many of the social curbs could be gone by the summer.

   As a result, the bank expects growth to really start rebounding from the 
second quarter of 2021, although activity will remain close to 5%, below its 
level before the pandemic struck in the fourth quarter of 2019.

   "GDP is expected to recover strongly to pre-COVID levels over the remainder 
of this year in the absence of most restrictions on domestic economic 
activity," the committee said.

   But it warned of "downside risks to the economic outlook" from a potential 
resurgence of the virus and the possibility that new variants may be resistant 
to the vaccine.