Policymakers of the Bank of England unanimously decided to hold the interest rate at a record low and asset purchase programme and signaled further easing if required. The bank also noted risk of longer-term damage to the economy from the coronavirus, or covid-19 outbreak.
At the regular policy meeting, the Monetary Policy Committee governed by Andrew Bailey decided to maintain the interest rate at 0.1 percent and the quantitative easing at GBP 645 billion.
The bank had altogether reduced the rate by 65 basis points at two unscheduled meetings this month. At a special meeting on March 19, the bank had cut its bank rate by 15 basis points and expanded bond purchases by GBP 200 billion.
The MPC said it can expand asset purchases further if needed. The committee said it stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy.
The economic consequences of the spread of the coronavirus are becoming more apparent and a “very sharp reduction” in activity is likely, policymakers noted. There is a risk of longer-term damage to the economy, especially if there are business failures on a large scale or significant increases in unemployment.
The nature of the economic shock from Covid-19 is very different from those to which the MPC has previously had to respond, the bank said.
The scale and duration of the shock to economic activity, while highly uncertain, will be large and sharp but should ultimately prove temporary, particularly if job losses and business failures can be minimized, the bank added.