LONDON | The Bank of England could announce Thursday an expansion of its asset purchase program to assist the United Kingdom in the face of the deep economic crisis caused by the confinement due to the pandemic of COVID-19.
This extension of QE (for “quantitative easing”, qe), which had already been increased from 200 billion pounds (338 billion $) and increased to 645 billion (1092 billion $) at the beginning of the pandemic, is largely expected by the observers.
Already, at the last meeting, in early may, two officials on the nine-component the monetary policy Committee of the bank had voted to increase this program by 100 billion pounds ($170 billion). And governor Andrew Bailey had not closed the door to a future monetary easing if necessary.
He has repeated recently that the Bank of England stood ready to act.
The policy of QE is to buy back the debt and inject so cash into the economy, in order to stimulate activity. These massive redemptions also help to keep down the rate at which up to the government to finance its support measures.
In contrast, the interest rate set by the Bank of England, currently at 0.1 %, a historic low, should not move, even if the speculation around a negative rate went a good pace these last few weeks.
“If the Bank were to announce a relaxation most important, we believe that it is keen to retain some fire power for the end of the year and to be able to announce a set of measures in the event of slippage of the recovery”, pointed out the analysts of Barclays. Inflation fell to 0.5 % year on year in may, a level not seen since June of 2016.
“The further drop in inflation in may is likely just the beginning of a prolonged period of very low pressure on prices, according to us, should lead to new measures of quantitative easing by the Bank of England”, has responded to the research house Capital Economics.
Recovery slower than expected
If the monetary institute expects a rebound in GDP of 15 % in 2021, after a collapse of 14 % in 2020, the caution is. The governor of the Bank of England reported in late may that the economic recovery would be “longer and harder” than expected.
S'”there are reasons to believe that economic activity will rebound at a pace faster than many recessions in the past (…), it is also possible that the pace of recovery of the activity is limited by the prudence of persistent households and businesses, even if the official measures of social distancing are relaxed,” he explained in a forum on the website of the Guardian newspaper.
For the moment, the instructions in force, attach to two meters the distance required between each person to avoid the risk of contamination. But the pressure weighs on the government to reduce this distance in order to give a boost to bars, restaurants and hotels, including the re-opening is planned for early July.
If the health situation seems to be improving in the United Kingdom, the country remains one of the most mournful in Europe, with more than 40 000 victims, and the third in the world, behind the United States and Brazil.