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.